In­no­vat­ing for af­ford­abil­ity

The Weekend Post - Real Estate - - Front Page -

THE build­ing in­dus­try is ex­plor­ing how in­no­va­tion can as­sist ef­forts to im­prove the cost of hous­ing as af­ford­abil­ity re­mains a ma­jor is­sue for the com­mu­nity and gov­ern­ments.

Speak­ing this week about the chal­lenges for the hous­ing sec­tor in 2015 at the Aus­tralian Green De­vel­op­ment Fo­rum in Bris­bane, Master Builders deputy ex­ec­u­tive di­rec­tor Paul Bid­well said much of new hous­ing stock was cur­rently pro­duced at price points that many peo­ple, par­tic­u­larly first home buy­ers, can­not af­ford.

“Aro u n d 9 0 p e r c e n t o f home­own­ers buy es­tab­lished homes. Builders face an on­go­ing bat­tle to shift home­buy­ers from es­tab­lished to new con­struc­tion,” Mr Bid­well said.

“The ris­ing cost of land, size and qual­ity of new homes and gov­ern­ment reg­u­la­tions are all im­pact­ing af­ford­abil­ity. Clearly, builders can con­trol only a frac­tion of the prob­lem.

“The hous­ing sec­tor’s re­sponse to date has gen­er­ally been around im­prov­ing busi­ness ef­fec­tive­ness and dif­fer­ent prod­ucts – smaller houses on smaller lots (in ad­di­tion to putting pres­sure on gov­ern­ments to re­form the reg­u­la­tory en­vi­ron­ment).”

Master Builders be­lieves there is an im­per­a­tive for the sec­tor to iden­tify new and im­proved prod­ucts, pro­cesses and sys­tems that will help drive down the cost of build­ing.

In its latest pro­duc­tiv­ity re­port, the OECD pre­dicted that i nno­va­tion would lif t pro­duc­tiv­ity by 62 per cent.

How­ever, re­cent stud­ies from Queens­land Univer­sity of Tech­nol­ogy, the Na­tional Hous­ing Sup­ply Coun­cil and the Aus­tralian Hous­ing & Ur­ban Re­search In­sti­tute have con­firmed that in­no­va­tion isn’t the hous­ing sec­tor’s strong suit.

While ma­te­ri­als man­u­fac­tur­ers are in­vest­ing in new ma­te­ri­als and prod­ucts, there isn’t a lot of up­take from the hous­ing con­struc­tion sec­tor.

In ad­di­tion, Master Builders’ own re­search into this is­sue dis­cov­ered an in­ter­est­ing lack of ur­gency among builders.

There is a pre­vail­ing view that off-site man­u­fac­tur­ing and mod­ern meth­ods of con­struc­tion are the next step to in­creas­ing af­ford­abil­ity and busi­ness prof­itabil­ity.

But to date, there has been lit- tle move­ment to­wards these by the in­dus­try.

The re­search sug­gests that this is not likely in the near fu­ture ei­ther, de­spite the long history of dis­cus­sion con­cern­ing the in­dus­tri­al­i­sa­tion of hous­ing pro­duc­tion and some ex­per­i­men­ta­tion with off-site fac­tory pro­duc­tion.

“There are many bar­ri­ers, not the least of which is the con­ser­va­tive cul­ture of the in­dus­try,” said Mr Bid­well. “Changes around con­struc­tion pro­cesses and ma­te­ri­als carry plenty of fi­nan­cial risk with­out strong ev­i­dence of cost sav­ings and con­sumer ac­cep­tance.

“For com­pa­nies build­ing less than 100 dwellings a year, these al­ter­na­tive con­struc­tion meth­ods are not vi­able.

“This equates to more than $25 mil­lion an­nual turnover.

“The re­al­ity is that 85 per cent of li­censed build­ing con­trac­tors have an al­low­able an­nual tur nover of l e ss than $600,000.

“This is the max­i­mum fig­ure – not nec­es­sar­ily ac­tual turnover, which high­lights that the build­ing in­dus­try is pre­dom­i­nantly com­prised of small busi­nesses.”

In a bid to help as­sist in­no­va­tion in the in­dus­try, Master Builders is keen to work with the state gov­ern­ment to en­cour­age the up­take of new con­struc­tion ma­te­ri­als and method­olo­gies to re­duce com­ple­tion times, drive down costs and help ad­dress hous­ing af­ford­abil­ity.

“The trick is to get to the smaller builders spread across Queens­land,” Mr Bid­well said.

“That, in my view, is a tough nut to crack.”

CHANGES NEEDED: Master Builders deputy ex­ec­u­tive di­rec­tor Paul Bid­well says the in­dus­try must ex­plore in­no­va­tion to im­prove af­ford­abil­ity.

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