As we review 2024, we see many Australian industries battle yet another year of volatility, none more so than the construction sector.
Construction companies have been hard hit, with rising insolvency numbers, high building costs, and labour challenges. For stakeholders within the sector, staying ahead with knowledge and insights remains critical.
This article recaps some of the key news that has impacted construction companies in 2024.
Almost 3000 Building Companies Had Insolvency Appointments
The year has been tough for builders, with ASIC figures showing that 2832 construction companies had undergone insolvency appointments for the 2024 financial year. This records a 28% increase over the 2023 financial year for the sector.
The downturn for builders has been sharp, coming from a significant challenge with high material costs, inflation, and labour challenges. The aftermath of the pandemic resulted in many fixed-price contracts becoming loss-makers, and insolvencies have more than doubled from the 2022 financial year.
While larger, more seasoned builders are able to secure residential housing or apartment projects, smaller builders have unfortunately had to shut their doors. But we’ve also seen many notable builders go under administration, such as Probuild and Porter Davis Homes
These collapses has left hundreds of Australians with unfinished homes and millions owed.
Labour Remains a Significant Issue
Labour shortages have remained one of the biggest issues facing construction companies, with 91% of builders in Australia pinpointing it as a major challenge affecting their business.
Reports shows that Australia’s infrastructure workforce will need to grow by 127% to meet demand. This can be a hurdle, considering the industry is facing a significant reduction in new apprentices.
Getting skilled workers in the sector proves to be a challenge, with high competition from other sectors, skills mismatches, and an ageing workforce. There is also a strong perception that construction careers are less desirable than white-collar jobs and that young Australians should pursue college degrees over vocational training.
Australia's Housing Crisis Has Gotten Worse
Research released by Master Builders Australia shows that many Australians perceive the housing crisis to have gotten worse. Some notable statistics from the report includes:
- 1 in 4 say housing is the most important issue for them (up from 8% in November 2023).
- 90% say it’s difficult to afford to buy or rent property in Australia.
- 85% agree there is a shortage of housing in Australia.
- 7 in 10 say the housing crisis has gotten worse over the last 12 months.
- 68% of renters who want to buy a home fear they won’t achieve it within the next 5 years.
- More than 1 in 3 Australians have gone without essentials like food, medicine or education to pay for their rent of mortgage in the last 12 months.
Surging demand has outstripped supply when it comes to housing. The country has experienced record-high net overseas arrivals in 2023, with forecasts projecting a population growth of 2.18 million over the next five years. This influx of people has created substantial pressure on the housing market.
At the same time, construction companies are hand-tied, battling with economic conditions that have slowed down or halted project completion times. Because of the increased borrowing costs, many builders have been more conservative in starting large residential projects, for fear of it becoming financially unviable
The Quest to Meet Australia’s Housing Target
In July, the government made an ambitious target – to build 1.2 million new, well-located homes by the end of the decade. To fuel this, the government committed $3 billion under the New Homes Bonus for states and territories.
The target drew some sceptism as Australia’s dwelling approval numbers fell 5.2% in the October quarter, with continued slow approval growth.
The building and construction industry is critical to meeting this target. However, it is also dependent on many economic factors. In early September, Master Builders Australia cut 53,000 homes from its housing forecast numbers, attributing it to a ”prolonged battle to curb inflation, persistently high interest rates and continued constraints on the supply side of the residential building market.”
However, the projection from Master Builders has since changed, forecasting that new home build numbers will start to peak at 241,000 in 2026 – 2027.
Building and Construction Industry Blueprint Announcement
In a joint media release, the government has announced a Building and Construction Industry Blueprint will be developed to bring significant reform to the industry. The blueprint was made with industry leaders, subcontractors, unions, and government agencies.
According to the statement, the blueprint development is currently underway until March 2025, addressing areas such as industry culture, sustainable change, and stakeholder collaboration. Builders are told that the blueprint will complement any existing work currently underway in the industry.
Key Takeaway
2024 has certainly been a tumultuous year for the building and construction industry. As we move into 2025, it is important to be aware of the trends that can guide our decision making in the sector.
Olvera Advisors ‘Navigating Market Volatility in Construction’ report offers an in-depth discovery, highlighting the current landscape and emerging dynamics trends for parties in or involved with construction.
To read about the latest challenges, trends, and strategies in construction, download our report.
