Pitcher Partners Melbourne congratulates the Victorian Government on their initiative to support the building and development industry, through the establishment of the Building Victoria’s Recovery Taskforce.
The property development, building and construction sectors of the property industry have been cushioned to date by pre-COVID-19 pipelines of work and because the construction industry has been allowed to continue through this Stage 3 lockdown period.
However, Michael Langhammer, Business Advisory Partner from Pitcher Partners Melbourne, explains that there is fear across the industry that as the pipeline of works is completed towards the end of the calendar year and into the first quarter of next year, that most of Government stimulus packages will have expired at a time when many in the property industry will be at their most vulnerable.
“I applaud the approval of the four major building projects last week but much more is required,” said Mr Langhammer.
“We want to see the Taskforce explore opportunities to stimulate and fast track projects, including community projects (metropolitan and regional), infill medium density projects, and urban renewal, social, defence and affordable housing projects.”
The property industry is made up of many businesses turning over less than $50 million and as such the number of projects and building contracts required to keep these developers, builders and contractors employed is significant.
The latest industry statistics show that 1.2 million people are employed in the sector, across 400,000 building and construction businesses. 73% of these businesses have seen an average drop of 40% on their forward work.
Of the $423.7bn revenue earned by the sector, almost half (49%) is generated by the sub-categories of residential building construction, building completion services and installation trade services.
“The highly fragmented structure of the building and construction sector is evidenced by the number of small-size enterprises. A large share of these (58.9%) have no paid employees and comprise mainly sole proprietors and partners. Almost 60% generate less than $200,000 in annual revenue and very few employ more than 20 people, while about 6% of them generate annual revenue of more than $2 million,” explains Mr Langhammer.
“The government must look beyond the major projects and consider the home builders in the middle-market bracket – those with an eye on growth – with the agility to pivot and move with market forces.”
With almost no current buyer activity the home building industry will have to make a standing start post the current period of hibernation. The traditional lead times for buyers to sign up to house and land packages will simply be too long for many players in the industry to bear.
“To support the engine room of the building and construction industry, immediate assistance being sought includes, lifting restrictions now to allow buyers to visit display homes (following mandated social distancing and hygiene protocols), significant stamp duty concessions for purchasers of new housing and reintroducing off the plan stamp duty concessions for all classes of purchasers to underpin the commencement of new projects.
“Action is required now,” Mr Langhammer said.