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Road to recovery: No mean taskforce

Road to recovery: No mean taskforce

Pitcher Partners congratulates the Victorian Government on their initiative to support the building and development industry, through the establishment of the Building Victoria’s Recovery Taskforce.

Pitcher Partners looks forward to adding our voice to the Taskforce’s considerations through the representation of our middle market/private, property industry constituency.

The property development, building and construction sectors of the Property industry have been “cushioned” so far by pre-COVID-19 pipelines of work, and the fact that the construction industry has been allowed to continue through this Stage 3 lockdown period.

Our fear is that as the pipeline of works is completed towards the end of the calendar year and into the first quarter of next year that the majority of Government stimulus packages will have expired at a time when many in the property industry will be at their most  vulnerable.

Pitcher Partners applauds the approval of the four major building projects last week but much more is required.

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 $423.7 bn 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.

This is why it is crucial the government look beyond the major projects and take into account the home builders in the middle-market bracket – those with an eye on growth and with the agility to pivot and move with market forces. These are the engine room of the building and construction industry.

The economic slowdown and resultant lack of consumer and business confidence is further exacerbated by the forecast reduction in population growth over the coming 24 months.

Our clients would like to see the Taskforce explore opportunities to stimulate and fast track projects. These may include:

  1. Community projects (metropolitan and regional) – a Victorian Government initiative akin to the Federal Governments schools program post the GFC (Building the education revolution)
  2. Infill medium density projects
  3. Urban renewal e.g. housing commission sites projects
  4. Social, defence and affordable housing projects

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.

Immediate assistance is being sought, including:

  1. Lifting restrictions now to allow buyers to visit display homes (with appropriate social distancing and hygiene protocols -the industry has clearly demonstrated its discipline as construction has continued)
  2. Significant stamp duty concessions for purchasers of new housing
  3. Reintroducing off the plan stamp duty concessions for all classes of purchasers to underpin the commencement of new projects

At the Federal level, our clients would also like to see the government expand the numbers and eligibility of the First Home Loan Deposit Scheme.

Action is required now.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

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