CONCERN OVER BUILDING BOOM COMEDOWN
Written on the 3 August 2016 by James Perkins
BOOMS can only last for so long and there is concern in the Queensland construction industry as to how the predicted building bust will play out in coming years.
Approvals have been at record levels for a few of years nationwide and BIS Shrapnel predicts a 50 per cent drop in apartment approvals over the next four years.
Brisbane typifies this boom in apartment building, as CoreLogic RP Data estimates 44,500 units will be finished in the city over the next two years.
Master Builders Queensland Deputy Executive Director, Paul Bidwell (pictured), says his most recent data for the state shows a record 50,000 dwelling approvals in the past 12 months, with more than half of those units, another record. Not all off those approvals will be built, but Bidwell admits some concern as to whether the numbers are sustainable.
"Approvals have eased a little, by a couple of per cent for the month and that is entirely due to the drop in units, which was around 7 per cent. There is a question mark over units and I am not sure how that is going to play out," says Bidwell.
"The numbers are defying gravity as of now. What is sustainable? Population growth is modest, employment is not that bad and interest rates are low. We are waiting anxiously to see what happens. We have no real sense of how that will play out."
It is mainly the apartment building that is the concern.
"It is the units, when you look at the number, it is quite an extraordinary number - 40 per cent of Queensland building approvals were units in greater Brisbane," says Bidwell.
"There is a question about how sustainable that is in inner and greater Brisbane. Whether it is going to be a hard, or soft landing, that question remains. I hope it is soft."
SV Partners predicts four major Australian construction companies, each turning over $100 million annually, are in "extreme risk" of financial failure, alongside another 35 high financial risk companies turning over between $10-$100.
The question is, where do those builders working on the building sites featuring the cranes in Brisbane and the Gold Coast go next? However, right now, there is still more work to do.
"We are not seeing any evidence of builders that are failing any more, or any less than in the last few years. There have been specific examples over the years, but Queensland is the most regulated state in Australia and developers must meet minimal financial requirements including setting capital aside.
"It is the best system in the country and that is all about making sure that builders don't fail financially."