Victoria will miss key housing goals and lose ground to other states on infrastructure building as it tackles a whopping $405bn construction pipeline by the end of this decade.
There are growing concerns over the future of Victoria’s construction workforce as a new report suggest the state will fail multiple housing targets. Picture: David Crosling
Master Builders forecasts have revealed the staggering level of work ahead of the state by the end of the 2030 financial year, including three major misses for government targets.
And it comes as the industry group has warned fuel shock impacts are adding cost increases to builds from concrete to steel, which combined with rising regulatory costs have builders retiring early and reluctantly letting go of apprentices as they struggle to cope with the deluge.
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The forecasts show that Victoria will fall short of its share of the National Housing Accord’s 1.2 million new residences target, and is only on track to build about 283,000 homes of the 307,000 it should.
The Allan government’s plan to build 800,000 extra homes in a decade will also likely fail.
Meanwhile, state planning hopes of a 70-30 split favouring apartment and townhouse development in established suburbs over new housing estates will be completely missed, with the best projection in any of the coming years putting infill development at just 48 per cent.
At present just 32 per cent of new home construction is for higher density, compared to 55 per cent for detached houses and 13 per cent for renovations.
Home construction in Victoria is already thousands of homes short of necessary levels, which will drive up the numbers needed to reach targets in the years ahead.
Master Builders chief economist Shane Garrett said based on ABS data, every $1m of construction work results in $2.3m of additional economic output.
At $405bn, Victoria could stand to gain an incredible $931.5bn in wider economic gains.
“At a local level, extra construction project work supports retailers, wholesalers and the suppliers of building materials as well as professional service providers,” Mr Garrett said.
But the figures are softer than might have been expected, and the industry group has noted Queensland and Western Australia are making ground against Victoria in key areas.
Concerningly, the forecasts precede the latest interest rate hike and the Iran conflict which has caused surges in fuel costs, as well as causing supply shortages for petrol, diesel and even PVC pipes — with the industry group warning this could significantly impact how the industry performs in the coming months.
The Master Builder forecast has the next financial year pegged as Victoria’s biggest for builders, with $82.518bn worth of works anticipated.
But that figure will slide to $80.622bn in the following 12 months and just $78.98bn by the 2030 financial year.
The report reveals the billions of dollars expected to be spent building homes across Victoria in the coming years.
But the projections are subject to change as a fuel crisis threatens to cause significant issues for the construction sector.
The Herald Sun understands builders are now grappling with $8-$10 levies per cubic metre of concrete, $100-$200 on steel deliveries, and even a $4-$6 surcharge per tonne of rubble and soil.
Additional issues are arising with the ability to access supply for PVC pipes, and the industry has long-term concerns over apprentices being let go as builders look to cut costs.
The report also notes insolvency stats for the industry.
Of Victoria’s 126,745 construction firms, about 1000 went into administration in the latest year’s-worth of data.
But the industry has warned beyond these figures, builders are pulling back on overstretching themselves as they grapple with rising red tape, regulation and insurance costs.
Master Builders Victoria chief executive Michaela Lihou said many builders were relocating or retiring early, while young people were being deterred from starting careers, as the industry grappled with pressures similar to those faced during the Covid pandemic.
Master Builders Victoria chief executive Michaela Lihou says tradies are already burning out and turning away from the industry, with figures still well short of targets.
“What we’re seeing is a quieter pullback, with builders scaling back, not taking on work or avoiding growth because the risk is too high,” she said.
“That’s not captured in the data, but it’s already affecting capacity.
“But unlike during COVID, many builders have already depleted their reserves and taken on debt to keep projects going and staff employed. The safety nets that once supported them are simply no longer there.”
It raises significant further concerns for the state’s building targets.
The forecast notes Victoria built 83,676 new homes in the first 18 months of the National Housing Accord, putting it 8400 behind the 92,082 needed to achieve its target.
It means the state will have to increase construction by about 15 per cent over the rest of the timeline.
Builders are already pulling back on workloads, but will need to push out even more home builds in the years ahead than they already are.
The report also warns that growing industry concerns about new regulations requiring 10 year rectification timelines, will make it harder for builders to expand their efforts.
“The risk now is not just insolvency; it’s a loss of workforce capacity,” Ms Lihou said.
“We’re already seeing burnout; people are leaving the industry, and businesses are becoming more cautious about taking on apprentices. And that’s a long-term issue.
“We want apprentices to see construction as a stable and rewarding career, but that becomes much harder if businesses don’t have the confidence to hire and train … if we don’t get the settings right, we won’t just lose businesses, we’ll lose the workforce we need to build the homes Victoria is relying on”.
The new report anticipates residential building will be the state’s main driver for the construction economy, with about $165bn in works expected to be completed as the state ramps up housing construction.
Residential construction is Victoria’s biggest building economy driver, with a $165bn spend forecast for the state.
Mr Garrett said key opportunities for governments to bolster housing supply and try to fill the shortfall centred on making first-home buyer grants and stamp duty arrangements more attractive for new builds, reducing additional stamp duty impositions on foreign investors, and improving planning and approval timelines.
“The costs incurred by builders and developers earliest in the project are the most off-putting: these include infrastructure charges and developer contributions,” Mr Garrett said.
“These need to be regulated more stringently so as to prevent overcharging. Mechanisms for spreading them out over the entire lifetime of the project must also be examined.”
Beyond housing, engineering and civil works, spearheaded by transport and utilities, are anticipated to drive $133bn worth of cashflow into the sector.
Non-residential construction is tipped to have $106bn spent by June 30, 2030.
Transport construction such as roads, as well as utilities infrastructure, will have about $133bn spent on it around Victoria in the next few years.
Ms Lihou added that with the forecasts showing a maximum of 48 per cent of new homes coming from units and apartments in any year between now and the end of the decade, the government might need to reconsider a desire to have 70 per cent of new homes built on development sites in established suburbs and 30 per cent to be created in new housing estates.
“If the 70-30 split cannot realistically be achieved, the government should focus on actual delivery,” she said.
“That means enabling both infill and greenfield supply, ensuring infrastructure keeps pace, and creating conditions that make projects viable and allow them to proceed. The real test is not whether a target is met on paper, but whether homes are actually built.”
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