What’s happening in the Australian construction industry?

Lets Review the Challenges facing Australian housing construction

We think it’s fair to say that nobody will be surprised to hear of the tumultuous couple of years we’ve experienced in the housing construction industry here in Australia. It seems like every few weeks we’re hearing of another construction company going under. And the stats show the sector is sadly still suffering the highest rate of insolvencies of any industry. The corporate watchdog Australian Securities & Investments Commission (ASIC), reported 2832 construction industry insolvency appointments in the 2024 financial year. A depressing 28% more than the previous year.

It’s why the Albanese Labor Government has focused on housing in the 2024–25 Budget with its promise to invest $90.6 million in the construction and housing sector. In this housing construction industry update, we’ll explore recent trends, challenges, and opportunities for investors, particularly those in the Australian Defence Force (ADF).

As property investment specialists, the team at Capital Properties know how vital it is to support the construction industry and educate investors on how to navigate this tricky market. It’s our job to make sure you know how take advantage of property investment opportunities to secure long-term financial future.

Book your Capital Properties Discovery Session to meet with our expert team and make sure you’re primed for investment opportunities. And remember, Capital Properties clients have access to our Property Investment Tools & Apps and Pinnacle Support Program.

On the go? Here’s 30 seconds of take outs:

• 2024 saw an increase in construction industry insolvency
• The government promised $90.6 million for the construction & housing sector in the 2024–25 Budget.
• Out of$258 billion worth of work in 2023, only $81 billion was in housing construction.
• Experts say that that 205,000 new homes per year are required but less than 175,000 new homes were built in 2023.
• Opportunities in the market:
  • Housing shortages means increased demand
  • Population growth
  • Net zero targets
• Issues facing the market:
  • Supply chain disruption
  • Higher material costs
  • Skilled labour shortages
  • Inflation and the cost of living
  • Lower housing approvals & net zero

Keep reading >>

Current housing construction situation

It might sound counterintuitive to hear that Australia’s overall construction industry is actually experiencing growth. The engineering sector, which focuses on building infrastructure for transport, energy, industrial, etc., has grown by 8.3% this year, and accounts for around half of all construction activity in Australia. However, home building isn’t following the same trend.  Out of $258 billion worth of work in 2023, only $81 billion was in housing construction.

This stalemate in housing construction, combined with other factors like increased population growth, has led to a significant shortage of rental accommodation which many are calling “the housing crisis”. Economists at the Housing Industry Association (HIA) have said that 205,000 new homes will be required each year to meet demand. With fewer than 175,000 new homes built in 2023, we’re falling well short of what’s required.

On the 8^th of May 2024, Julie Collins, the Minister for Housing, Homelessness and Small Business said: “Our Government knows that building more homes is the best way to address Australia’s housing challenges, which is why we have an ambitious national target to build 1.2 million homes.”

Issues and opportunities in Australian housing construction

So, let’s take a closer look at the current housing construction situation. Firstly, there are great opportunities for growth due to:

• Housing shortages = increased demand
• Population growth
• Net zero targets

But the industry is facing significant issues, including:

• Supply chain disruption
• Higher material costs
• Skilled labour shortages
• Inflation and the cost of living
• Lower housing approvals
• Net zero (yes, it’s an opportunity and an issue)!

We’ll examine each of these further below.

FACTORS DRIVING HOUSING CONSTRUCTION DEMAND

At the time of writing (October 2024) it’s projected that 167,000 new homes will have been built this year.  And the expectation is that it’ll average out to approximately 180,000 per year thereafter. This falls well short of the recommended 205,000 homes required to meet demand. Of course, this varies across different states and territories, but some states like Queensland are feeling it the most.

Source: https://www.amp.com.au/insights-hub/blog/investing/econosights-state-housing

Population growth

The Australian Bureau of Statistics (ABS) confirmed that Australia’s population reached a record 27 million earlier this year – and it shows no sign of slowing down. Almost 650,00 people arrived in Australia in the 12 months to March 2024. Australia’s population grew by 164,635 in the first 3 months of the year alone – 133,802 of those from overseas migration. This has led to a severe housing shortage, particularly in urban rental accommodations, driving rental prices higher and putting immense pressure on the housing market.

The ABS have predicted that overseas migration could continue to increase Australia’s population from 27 million in 2024 to somewhere between 34.3 and 45.9 million people by 2071.

Net zero targets

The Australian Government has developed an ‘Infrastructure Net Zero’ Initiative, working with government and industry stakeholders to create policies and encourage innovation to achieve the decarbonising of infrastructure. With support from organisations like the Australian Contractors Association and researchers from the University of New South Wales (UNSW), a national reference guide has been created to help move Australia towards its net zero target.

This innovation will of course come at a cost (estimated at $1.3m) to achieve new emissions targets, and specialist knowledge will be required. So, yes, this offers an opportunity for innovation and growth. But, in an already struggling industry these new challenges will be another obstacle to surmount.

AUSTRALIAN HOUSING CONSTRUCTION CHALLENGES

Supply chain disruption and higher material costs

The pandemic highlighted major issues with Australia’s construction supply chains. Customers were more understanding of the delays and shortages of critical materials in 2020, but the recovery isn’t happening as quickly as anyone would like. With global economies still reeling, the supply chain disruptions look set to continue for some time yet.

Materials like timber, steel, and concrete are still harder to come by, and higher shipping and production costs are continuing to drive up prices. The Hays Construction Industry Report Australia FY24/25 reported a 5.9% increase in overall construction prices in last year. These rising costs affect project timelines and budgets, making it difficult for developers to maintain a profit.

Skilled labour shortages

The Australian construction industry is facing a severe shortage of skilled workers. The above-mentioned Hays Construction Industry Report states that Australia will need 90k new construction workers – immediately – in order to meet the government’s housing targets. Build Australia puts the figure closer to 130,000​.

In the Feb 2024 ABS ‘Job Vacancies Survey’ construction businesses reported almost 280,000 job vacancies across the sector. That’s why the government announced a spend of $90.6 million in the 2024-2025 budget to increase the number of skilled construction workers. This includes a program for incentivised (or free) TAFE training and encouraging migration of skilled workers.

Interestingly the Irish Government had launched an expensive advertising campaign aimed at encouraging skilled labour to “build back home” to fill a shortfall of 50,000 jobs in Ireland. So, it will be interesting to see if our government’s plan to encourage migration of skilled workers will work.

Either way, these solutions certainly seem like long-term fixes to an immediate problem.

Inflation and the cost of living

Many Australian households are barely coping after 13 (almost) consecutive interest rate hikes in 15 months since May 2022. Rents are at an all-time high and essential items such as food, utilities and mortgage repayments have almost doubled in some cases. That means that people are more likely to stay in their existing homes, rather than risk applying for mortgages at higher rates. And many would-be homeowners have been priced out of the market.

Elevated borrowing costs also means that some developers have been cautiously awaiting more favourable interest rates before investing or re-investing.

Lower housing approvals

The combination of higher material costs, labour shortages and high interest rates result in less developers applying for new housing (dwellings). In fact, new dwelling approvals in Australia are at the lowest they’ve been for 12 years. For the year to June 2024 almost 163,000 houses and apartments were approved. That’s a drop of 8.5% on the previous year and the lowest we’ve seen since 2011-12.

Michael Bleby, Deputy Property Editor from Australian Financial Review (AFR) wrote in September 2024 that Labor’s hopes of building 1.2 million new homes in five years are fading fast. Master Builders Australia (MBA) estimates that only 1,033,962 new homes will be built over the five years to 2029, which is down more than 53,000 from the 1,087,325 total it predicted in April.

Outlook for Australian housing construction

In the Housing Industry Association (HIA) “Housing Australia’s Future 2024 Report”, they say: “this analysis has defined a range in which building activity will need to sit over the next thirty years. This is to account both for population growth and for the various factors defined throughout this report that influence housing demand. At an Australia-wide level, it is estimated to be between 190,000 and 275,000 new homes per year.”

The government is under pressure to relieve the current ‘housing crisis’ and the budget reflects this. With the Housing Australia Future Fund and the National Housing Accord they’ve allocated more than $9.5 billion to housing in this financial year. The good news is that economists predict this will start paying off. It’s predicted that there will be solid growth from 2026, with total building increasing to $130.4 billion – an increase of 9%.

Opportunities in the Australian housing market

To meet the escalating demand, the housing construction industry will need to invest in building innovation and sustainable practices as well as skilled labour. Builders are forced to offer more attractive workplace benefits, including competitive salaries along with training and development programmes that allow for career progression. This investment will pay off in the long term with more economical and efficient practices and better retention for skilled workers.

This housing construction industry update shows that changes are necessary to facilitate increased construction and they can’t come quick enough. Both state and territory governments are under pressure to streamline building approvals, and grants are available to encourage the adoption of innovative construction methods such eco-friendly buildings or prefabrication as well as investment in technology.

High rents and rental yields mean that many investors are taking advantage by putting money into new builds. The Australian Bureau of Statistics (ABS) show investor loans for new home construction increased by 7% before seasonal adjustment from June 2024 to $1.6 billion.

For ADF property investors, the changes in the housing construction industry presents challenges, but also opportunities. The team at Capital Properties are keeping a close eye on market trends and government initiatives aimed at boosting housing supply. It’s our mission to help you understand these dynamics so you can make informed decisions on when and where to invest to meet your long-term financial goals.

To make sure you’re perfectly poised to take advantage of any investment opportunities, we recommend that you book into our FREE Capital Properties Discovery Session and/or our Switched-On Strategy Series.

Note: This information is general advice only. Always do your own research and seek independent financial advice

ADFA – Yes, it’s time to start building your property portfolio

If your in ADFA don’t wait to build your property portfolio!

ADFA – Start your property portfolio now for future financial success

As Australian Defence Force Academy (ADFA) members you’re already committed to defining yourself as leaders of the Navy, Army and Air Force. At Capital Properties, we want you to apply that same commitment to your own future financial success. And, believe it or not, right now, while you’re in the ADFA is the perfect time to start building your property portfolio.

While your military training prepares you for many challenges, it might not fully prepare you for life after your service. And we know that for most young people, financial planning doesn’t take top priority. That’s why we’ve made it our mission to work with ADFA members to help them learn strategies for long-term financial success without compromising on their lifestyle. And we believe that building your property portfolio is the very best way to do this.

We often hear from our clients that they just wish they’d started building their property portfolio earlier, so read on to learn how we can help you avoid that same mistake.

Now is the perfect time to consider building your property portfolio and laying the groundwork for long-term financial freedom. At Capital Properties, we specialise in helping Australian Defence Force Academy (ADFA) members like you, to invest your disposable income wisely, turning today’s savings into tomorrow’s security. To get started, book your Capital Properties Discovery Session now.

On the go? Here’s 30 seconds of take outs:

• If you’re in the ADFA then it’s time to start building your property portfolio.
• Capital Properties helps ADFA members to invest disposable income wisely.
• Starting your property portfolio in the ADFA means that you’re able to:
• leverage your income & access ADF-specific financial benefits,
• make your disposable income work for you,
• access the power of compounding growth,
• secure your future financial freedom.
• Attending our FREE Discovery Session takes you through our 7 step successful property investment strategy.
• The first 3 steps to successful property investment are:
• set clear, actionable goals,
• know your finances,
• identify your property investment strategy.
• The Capital Properties team will work with you through all 7 steps, including researching the Australian property market, identifying the right property, cash flow, rental income & tax benefits etc. as well as your ongoing investment strategy.

Keep reading >>

It’s rare to find 18- or 19-year-olds who are already thinking ahead to retirement. And it’s just as unlikely that property investment would be on their radar, especially with some of the media reporting about the current property market here in Australia. Plus, we know how much focus is required to excel in your military career. But we also know that the early bird catches the worm.

 

Our founder and Director, Marcus Westnedge made his first property investment early in his naval career, allowing him to create his ideal lifestyle. That’s why he’s so passionate about educating ADFA about property investment opportunities. Here’s why starting now makes all the difference:

 

1. Leverage your financial position

As an ADFA member, you’re in a unique position to be able to leverage your stable income and utilise valuable financial products designed to help ADF members invest in their future. For instance, Australian Defence Force Home Loans can provide you with generous interest rates and loan structures that aren’t available to the general public. Our recent blog post “Home Buyer Entitlements for Defence Members” covers ADF, Federal and State entitlements.

2. Make your disposable income work for you

So many people waste their disposable income on unnecessary ‘stuff’. Creating good habits now will pay dividends in years to come. Setting up a regular savings deposit creates discipline and accountability. That means you won’t get sucked into spending your hard-earned dollars on stuff that doesn’t matter to you, but you’ll have the money available for the important purchases when you need it.

3. The power of compounding growth

Property investment is a long-term strategy that benefits from compounding capital growth. The earlier you start, the more time you give your investment to grow. And because, property values typically rise over time, especially in key locations, having more years of ownership under your belt means you can reap more of the benefits. This is why we say, “time in the market is more important than timing the market”.

4. Future financial independence

By investing now, you’re not just buying a house, you’re securing your future financial independence. The aim is to reach the end of your military career with an established property portfolio that generates passive income. This gives you the financial security to retire comfortably or pursue new ventures without the pressure of financial constraints.

How to get started in property investment

At Capital Properties, we’ve tailored our services to support ADF members at all stages of their investment journey. If you’re a first-time investor or unsure where to begin, we’ve got you covered. We offer a structured approach designed specifically for your unique needs. When you attend our FREE Discovery Session we’ll take you through our 7 step successful property investment strategy. Here’s a taster of the first few steps:

Step 1: Set clear, actionable goals

The first step in building your property portfolio is to set clear goals. Identify what you’re trying to achieve with your investments? Whether it’s generating rental income for a second income or for long-term capital growth to fund a comfortable lifestyle down the track, your goals will dictate your investment strategy. Our guide on Goal Setting Strategy is a good place to start.

Step 2: Know your finances

A key aspect of starting your property portfolio is finding out exactly where you are financially. That means completing an Asset & Liability work sheet and figuring out your borrowing capacity. You find this tool and others in the Capital Properties Property Investment Tools & Apps page on our website.

As an ADFA member, you have access to financial products that provide flexible terms and competitive rates such as interest rate discounts, lower fees, and greater flexibility. All of which make it easier to buy your first investment property. Capital Properties can help guide you through the process of assessing your resources and securing a loan that fits your situation.

Step 3: Identify your property investment strategy

Once you’ve clarified your goals, and know where you stand financially, the next step is to create a clear plan – or strategy – for achieving them. This is where it really helps to get the right team around you. They’ll help you create a property investment strategy that is specific to you and aligns with your goals.

ADFA property portfolio development

Steps 1 to 3 in the Capital Properties 7 step successful property investment strategy will help you discover if property investment is the right tool to help you reach your financial and lifestyle goals. But for successful ADFA property portfolio development, we’ll need to work through steps 4 to 7 of the Capital Properties 7 step successful property investment strategy where we really get into the nitty gritty of investment.

This includes everything from researching the Australian property market, to identifying the right property and tenant for your circumstances. We’ll also help you keep on top of cash flow and make sure you know exactly where you stand with rental income, interest rates and tax benefits etc. If this sounds daunting, please believe us when we tell you that after we’ve worked with you, you’ll be fully empowered with all the education you need to be able to make sense of this much more easily. Hell, you’ll probably even want to get your friends and family in on the action too!

And our help doesn’t stop once you’ve made a purchase. We’ll be there for the construction phase (if appropriate), property management and make sure you’re on track with your ongoing investment strategy.

Ready to start building your property portfolio?

The path to financial freedom starts with your first step. By investing in property in the ADFA the sooner you start, the more you stand to gain. The team at Capital Properties are passionate about helping you to start building your property portfolio and securing a stable, profitable future.

Remember, the earlier you start the sooner you can reap the rewards, so book your FREE Capital Properties Discovery Session today and discover the Capital Properties Switched-On Strategy Series.

As part of our commitment to your ongoing success, you’ll have access to all of our Capital Properties Property Investment Tools & Apps and Pinnacle Support Program.

Note: This information is general advice only. Always do your own research and seek independent financial advice

Take advantage of the Capital Properties Pinnacle Support Program

Are you On Track or off track to meet your goals?

So much has changed in the world of finance and property investment in the last couple of years. If you haven’t been keeping up with these changes, you might be missing out on some serious opportunities. Even if you’ve been staying up to date with our Capital Properties news posts, it’s important to make sure you’re still on track to meet YOUR goals.

The experts at Capital Properties recommend taking time at least once a year to meet and re-evaluate your property investment and long term financial and lifestyle goals. During this catch up we can make sure you’re on track to achieve your goals and are actively taking the next best steps to get you there. So, if you’re due for a review, don’t put it off a second longer. Book in here.

The Capital Properties Property Investment Tools & Apps and essential resources from our Capital Properties Pinnacle Support Program will help you take stock and make smart decisions for now and the long-term.

On the go? Here’s 30 seconds of take outs:

• It’s vital to regularly review your progress against your goals. Make sure you’re on track and know the next steps to take to achieve your long-term vision.
• Working on your financial, lifestyle and property goals can feel overwhelming. We’re here to help with a range of free tools and our Pinnacle Support Program review.
• Our Pinnacle Support Program Review supports you to achieve what’s important to you – and it can all be done over the phone to fit in with your schedule.

Keep reading >>

Still set to achieve your goals?

Due for a review? We know that life gets busy, and the weeks turn into months so quickly, before you know it years can have flown by. It’s easy to feel overwhelmed with so much to keep on top of. Can you be sure that you’re consistently doing everything you need to maximise your potential and achieve your goals?

That’s where we can help. We developed the Capital Properties Pinnacle Support Program to make sure you stay on top of your game with as little effort as possible. If you’re not confidently answering these questions below, then get in touch for a review so we can make sure you’re still on track.

Ask yourself truthfully:

• Am I clear on what my end goals look like?
• Am I on track to achieve those goals?
• When was the last time I updated my Asset and Liabilities spreadsheet?
• Are my weekly, monthly, yearly tasks all set to achieve my goals?
• When was the last time I did a desktop valuation / full valuation of my investment property?
• Are my tax returns up to date?
• Am I up to date with the latest statistics for my property’s suburb?
• When was the last time I viewed a suburb profile for my property’s area?

Do I know what I need to do next to progress my goals?

Lifestyle goals changed?

Property investing is a journey not a destination. Some of your goals can take 10 to 20 years and it’s normal to feel some resistance along the way – that’s just life!

In the last few years, I’ve taken stock of my total property deals since I first began investing in 1998. From starting as an absolute novice to completing over $6million in property transactions, grossing over $2million. In my early days in the Navy, I couldn’t have dreamed of this kind of financial security. But I applied the Capital Properties Property Investment strategies and stuck to my goals, even when it wasn’t easy.  In fact, it’s during the tough times that these strategies and our expertise can really make the difference.

“When everything seems to be going against you remember that the airplane takes off against the wind, not with it.” Henry Ford

Setting goals and achieving them means more than making money. It’s helped me realise the lifelong dream I had to build my dream home. I’ve created generational wealth to make sure my family is looked after. And I’ve developed relationships with professionals that means Capital Properties continues to grow and thrive so we can share our success with you.

Let’s take stock

Even if you feel like you’re in a great place right now and your investment(s) is working hard for you, it’s worthwhile taking a moment to re-evaluate. Like the property investors hymn says “One property is good. Two is better. Three offers more opportunities. Four or more becomes a challenge to manage but really opens up your options and the ability to get set up.”

Review financial & lifestyle objectives

Simple and yet profound! Get started by taking our Investor self-evaluation test with our free Capital Properties Goal Setting Toolkit

• Mind map your goals
• Write a plan outlining how to achieve your goals

Create an action list

Complete an Assets and Liabilities Worksheet

This is the easiest way to get a visual on your inflows and outgoings. Your financial situation will become clear and you’ll be able to see where you need to make changes. Also, where you can make the most of opportunities. You’ll find the Capital Properties Net Asset Position Calculator and Assets & Liability Calculator here.

Take it further with the Pinnacle Support Program

Book in for your Pinnacle Support Program Client Review here. Here’s a taste of what you can expect:

– Latest property data and research

To help you evaluate your investment property(s) cash flow position and comparative market analysis, we’ll review the latest data including:

• RPdata suburb and statistics reports for each property
• Residex suburb reports
• The latest Forecast ID demographic reports
• Desktop and full valuations
• Rental manager feedback and reviews

The latest vacancy rates data

– Strategy development

Once you know how your investment(s) has performed we’ll work out an individualised strategy to continue building your wealth. Our finance team will confirm your new borrowing capacity. From there we can discern the next best steps forward. That might look like one of the three options below.

• Option A. Capacity for a new purchase

If you have capacity, we can start to explore property investment opportunities in line with your budget and goals. We know you’re busy, so much of the process can be executed over the phone to work within your Defence Force schedule.

• Option B. Increasing capacity

If your current situation doesn’t allow you to make your next investment just yet we’ll give you some steps to implement, such as tenancy and maintenance tips that will increase your capacity and help you get closer to what’s important to you.

• Option C. Consolidation

You might want to consolidate your finance, find better than your current interest rates and reduce your investment/personal debt. Our finance team can assist you with negotiating interest rates directly with the bank and/or refinancing your current loans.

Again, if it suits you better and to save your valuable time, we can do all, or most of this over the phone.

The next best step?

We want you to realise your financial and lifestyle goals using our tried and tested property investment strategies. And we know that the unique demands of Defence life mean you don’t always have time to stay updated and make sure your investment(s) is working the hardest for you.

Our Pinnacle Support Program is designed to make this process as easy and efficient as possible. After completing the Pinnacle Support Program Client Review you’ll have a clearer vision of your current situation and what’s important for you do on a day to day basis to achieve your goals. As the proverb says: ‘Iron sharpens iron, so one person sharpens another’. So, if you’re due for a review, the sooner we get to it the better.

We designed our Capital Properties Switched-On Strategy Series and Capital Properties Pinnacle Support Program for you. Along with free investor tools like our Property Investor – Self Evaluation Tool, we’ll make sure you reach your goals.

Call us on 1300 653 352 to get the ball rolling.