New blocks blocked, small builders go bust

Small builders are going bust in record numbers as building construction lags behind demand, costs soar and work has stalled on more than 35,000 strata homes that have been approved but are sitting unbuilt in Western Sydney

According to a story in the Australian Financial Review, the gridlock is due due to “increased material and construction costs, land prices, finance fees and more competition for a limited number of qualified trades.”

That means the federal Labor’s government’s target of 1.2 million new homes nationally by mid-2029 is now  likely to fall 400,000 homes short of that target.

Meanwhile Australian Bureau of Statistics figures on building approvals offer some optimism, despite a fall of 15.1% in apartment blocks, month to month in March, with the number of apartment approvals in Victoria only around one third the level of approvals in February.

According to commercial credit reporting bureau Creditorwatch, even with this sharp drop and unusually low result in Victoria, approvals remain 47% higher than in March 2024, suggesting that there’s an emerging recovery in medium and high density housing construction activity.

CreditorWatch’s Chief Economist Ivan Colhoun says that while a small fall in residential approvals had been expected in March. the decline was a much larger than expected 8.8% month to month. 

“One always has to allow for volatility in this series on a monthly basis, especially in the medium and higher density approvals category,” he said.

“This month also saw quite a sharp decline in freestanding house approvals which if it turned out to be more signal than noise (I expect it to be the latter), would be quite concerning, particularly as many smaller builders operate in this part of residential construction.

“Construction insolvencies have continued at record highs in recent months. Encouragingly for larger building companies, the trend remains strong for multi-dwelling apartments. Both categories of construction approvals and activity should benefit from a further cut in Australian interest rates in mid-May, with another 25bps rate reduction expected.”