You can’t run two construction booms at once!
When I look down the telescope at the next 5 to 10 years, I see an epic housing shortage coming.
“Hang on, Dymphna. Aren’t we already in an epic housing shortage?”
Yes. Yes we are. But it’s about to get epic-er.
Current budget projections have the Australian population growing by about 1.4m people over the next five years.
That’s equivalent to the city of Adelaide.
And so that gives us a sense of the size of the housing challenge. We have to somehow build an Adelaide’s worth of houses and units over the next five years.
If that sounds difficult and unlikely, it’s because it is. I haven’t heard of an industry expert yet who thinks Labor’s target for 1.2m homes is anywhere near realistic.
But this is the thing. Nothing happens in isolation.
And if we’re going to house everybody, not only do we have to rebuild the entire housing stock of Adelaide, but we also have to build an Adelaide’s worth of infrastructure.
What’s that? 100 schools? Half a dozen hospitals? 100 commercial centres. Half a dozen Westfields?
And the churches! Think about all the churches in Adelaide.
So not only do we have to build an extreme amount of housing, we also have to build an extreme amount of infrastructure.
But builders are builder. There’s not a labor pool of residential builders, and a separate labor pool of infrastructure builders.
Same story with materials. Steel doesn’t care if it’s going into a house or a hospital.
And so you’re going to have residential projects competing for resources with commerical and government projects, at a time when both are trying to ramp up in a massive way.
That creates all sorts of problems.
People are just starting to cotton on to it. The CEO of on Sydney builder sees things getting tough:
Residential developers have to take on more of risks of rising costs and delays if they want to secure access to builders and subcontractors at a time when demand for education and health work is booming, the head of Sydney builder Richard Crookes Constructions says.
…That means fewer apartments. Official figures published this week showed housing starts of new apartments, semi-detached dwellings and townhouses fell to 61,392 over the year to June, the lowest figure since 2012.
“We continue to forecast a material slowdown in housing starts,” Jarden economist Carlos Cacho said.
… But in a warning to government and private efforts to boost housing stock and tackle the country’s chronic shortfall of rental housing, Mr Crookes said securing subcontractors and trades was harder in residential building than non-residential commercial work.
“Getting people to work on residential projects – that’s been a real challenge,” Mr Crookes said.
And once government projects start getting delayed and then they start throwing money at builders to get it done, suddenly no one will want to work building houses. Government projects will be where the money’s at.
Which is why I think there’s very little chance that the housing stock will keep pace with the population in coming years.
That shortage is about to get epic-er.