The wheels have fallen off the construction industry: Michael Matusik

Here is a good question for you.

Which industry is Australia’s largest?

One might think it would be mining, given the amount of airplay it gets.  But with about 8,500 business operations you would be way, way off.

Have another go. Public administration? Wrong. Professional services? Incorrect. Retail? No.  

The answer is construction, with just under 350,000 businesses operating across the country.

One in every sixth business in Australia builds something.

Sadly, however, the building game must be on the nose because 5,575 construction-related businesses stopped trading over the last 12 months alone.

According to some great work by Craig James and his economic team at Commbank, we know that 1,840 residential property operators closed their doors last year. A further 680 home builders shut up shop. So did the same number of brick layers. Plasterers broke the trend with just 630 operations laying down their trowels.

Talk about the wheels falling off the ute.

Australia’s dwelling construction rate – measured as the number of new homes built per capita – is at record lows.

Since I was knee-high to a grasshopper, the average Aussie build rate has been eight new homes per 1,000 head of Australian population. This rate, like all things in the construction game, has peaked and troughed, but since the mid-1990s it has been on a steady trend down. Today it averages just six.

This might not sound like much.  So let me put it to you another way, we are now building 25% less homes than we used to.

New property has never been our first choice. This applies across the spectrum – whether you are buying for the first-time; upgrading or downsizing; or buying for investment.

The statistics suggest that just one in every five first homes purchased is new. It is even less for investors, with 85% buying a resale instead of a new dwelling. Second and subsequent owner-buyers, seem a little keener for something new, with one in four opting to buy new digs rather than something older.

The Commsec analysis also shows that there has been a major increase in the number of Australians starting their own superannuation funds.

Apparently there are now 75,000 superannuation funds in operation across Australia. This segment is growing by about 5,000 new businesses each year.

As a result of this growth – and in direct contrast to residential property operations – Australia’s non-residential property sector is increasing in size, up by 300 new businesses last year, to 57,000 operations Australia-wide.

Also, the bulk of Australian workers are employed by small or medium-sized businesses.  In fact, 61% don’t employ any staff at all. A further 24% employ just a few people. Just one in every 20 Australian businesses employs more than 20 people.

As one would expect, most businesses are located in NSW (33%); followed by Victoria (26%); Queensland (20%); Western Australia (10%) and South Australia (7%).

Business numbers grew the most in Victoria (up 8,000 new firms), then followed by NSW (up 4,000) last year. Business numbers fell last year in Queensland; South Australia; Western Australia and Tasmania.

Talking a longer view, there have been 70,000 new business start-ups across Australia over the past five years – 32,500 were in Victoria; 21,500 in NSW; 7,300 in WA and just 4,000 in Queensland.

For more information from the economics team at Commbank, go here.

Job creation – and that means new business operations – is very important when it comes to the overall health of the property market. With new business market shares like this, it is little wonder that the Sydney, Perth and now Melbourne residential markets are doing so well.

There has been very little national conversation about getting more housing starts underway. Sadly, not a peep out of either side of federal politics. Precious little meaningful dialogue is coming from state or local government, too.

Interest rates need to continue falling in order to (hopefully) lift housing starts.

One thing to consider is allowing superannuation funds – with the right caveats – to invest more easily in new housing construction. It is starting to happen. It can be a great and secure investment. Unlocking this potential is one way forward.

Post the September 7th  election, it is small and medium-businesses that will make Australia work. Wind back the legislation. Make it easier for us to operate. 

It is a 24/7 world – no penalty rates, leave loading, mandatory sick leave or (within reason) minimum set hours. Cut the red tape. 

The vast majority (like 99%) of employers aren’t shitty bosses, they reward good staff. Allow us to employ more.

Michael Matusik is the founder of Matusik Property Insights, which has helped over 550 new residential projects come to fruition.  

Read Michael’s Blog or follow him on Facebook and Twitter  or connect via LinkedIn.

Michael Matusik

Michael Matusik

Michael Matusik is the founder of Matusik Property Insights, which has helped over 550 new residential projects come to fruition.

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?