Latest / The Good Builder Podcast / The Daily Dose #82 | Brisbane’s Boiling Over + The Rate Cut That Didn’t Happen
Transcript
- Aaron Ng (00:06) Good morning legends and welcome to the Good Builder podcast. The podcast where we keep it real for builders, suppliers and anyone trying to stay ahead in this mad industry. And today we're gonna talk about two big swings in the market that hit the building game hard this week. Number one, the RBA didn't cut interest rates. If you saw Tuesday, 2.30 despite inflation falling and everything else that's going on and the living pressures, the RBA decided to keep the cash rates steady and not cut interest rates. Number two, the other big thing that hit this week was Brisbane is now officially Australia's most expensive city to build in and it's only gonna go up from here. So over the past few months, as you've seen us report on the Good Builder and many other media outlets report, The of construction has gone up considerably around state to state, but we've broken it down to see which state is the most unaffordable to build in or seen the most for eyes. In Brisbane, you got the gold medal. Okay, number one, the rate cut that wasn't. So for everyone out there who thought they were going to get some avocado and toast in the next couple of months, hold on to that thought. Tuesday's RBA meeting came and went and there was no movement. This was all despite the ABS showing that inflation was at just 2.1%, well within the target that the Reserve Bank said it should be and they still said, nah, let's wait. Governor Michelle Bullock reckons the monthly inflation figures weren't reliable enough and they want to wait for the proper quarterly data, which is due on July 30th. So put that all in your calendars, everyone. And if they expect it to land at about 2.6 % or lower, we should see a rate cut at the August 12 meeting at 2.30 PM as usual. We're gonna keep our eye out for it, but for now, just hold the champagne and probably just hold the smashed avo too and hopefully we're in some better news On the flip side, meanwhile, Brisbane's build costs are going off. Now here's the reality. While rates stay steady, construction costs in Brisbane are surging. And according to Turner and Townsend, it's the most expensive city in Australia now to build in. So if we run the numbers, we had a look at all the cost of construction around Australia and we got it from various sources. And what it's sort of saying is Brisbane is about $5,009 on average per square meter. Sydney sitting at 4,866 per square meter. Melbourne. 4242 per square meter Perth 4997 per square meter. Adelaide, last but not least 4133 per square meter. Yep, Brisbane's top Sydney and we've still got seven years until the Olympics. So why Brisbane and why now? There's a bit of a perfect storm that's hitting the Sunshine State. The massive projects that are happening like the Cross River Rail, the Brisbane Metro, the Bruce Highway upgrades are all sucking up a lot of our skilled trades. Now, when you combine this with the 2032 Olympic build and all the construction that needs to happen with that, with a 7 billion plus forecast for this project, labour shortages delays and higher costs are inevitable. The EBAs are locking in a 5 % plus annual wage rise, which adds some serious pressure for anyone trying to hit margin. And here's a quote that we're saying is the quote of the week from Tiffany Emmett at Turner and Townsend. Elevated cost growth is the new normal. now nobody wanted to hear that, but it's probably what we all needed to. But what does this actually mean for builders and residential builders? And we're try and bring this down to the ground level. So if you're running a crew or quoting jobs in Southeast Queensland now, here's what's changing. Margins are under siege. If you're still using last year's pricing templates, you're bleeding. Labor, materials, EBAs, holdups, it's all death by a thousand lines. Productivity matters more than procurement. Builders who can deliver efficiently will win. This means tightening your site processes, partner with the right trades, and maybe look at prefab or modular to speed things up if you can, and that suits the type of construction that you're doing. The other thing we're seeing is lead times are getting longer. Olympic projects, infrastructure, and commercial works are all stretching everyone thin. Expect longer waits and start planning for them now if we were you. And apartments, just forget it unless you're the ultra premium. I know this isn't all for our audience as we too... focus on the residential home building sector. But developers are openly saying that numbers don't stack up with the apartments unless they're selling for about 2 million plus in Brisbane. And that rules out most of the first home buyers and middle market clients. So what's getting built at the moment in Brisbane and what seems to be moving? Luxury downsizer stock, super prime projects, high-end knockdown rebuilds, and the rest? The rest seems like it's a bit on ice, not to mention it's hard to find land. We saw a video actually from HIA's Tim Reardon, and I think he summed it up pretty perfectly. This is what he said. It's prohibitively expensive to build new apartments in Australia right now. And that's what the feeling is out there with all the developers we're talking to and a lot of the feedback we're getting from that developer market. So what is actually gonna happen? Well, this is where things could possibly get messy in a good way and a bad way. If rates do start dropping from August, like many expect, demand in residential will heat up again. It means more quotes, more jobs and more pressure. But if the workplace supply doesn't improve and they're getting poached by other infrastructure or other projects, such as the ones we mentioned earlier in this podcast, we're gonna see another serious capacity crunch and the cost of build will keep rising. So if we were builders out there and suppliers, this is some of the things that we thought would share with our community of what we would do now. We're thinking this is not gonna be a short-term bump. It's gonna be structural and it's gonna change the way that we're building in future for the years to come. Here's what we recommend. is to forecast smarter, build the cost rises into the feasibilities and all the equating and things like that. Engage early with clients and trades and finances. Partner with reliable suppliers who can help you stay on track and that are transparent with you in providing price updates and that will work alongside you. Where it makes sense, look at prefab or modular. and focus on productivity, not just the materials pricing, because you don't have that much control over that. To be honest, we'd love to hear from people out there or builders out there, trades out there, anyone that is facing what we're facing in the industry right now. And we want to know, are you feeling the squeeze on labor or quotes? Have you started shifting the type of jobs you take on? What are some of your clients saying? Are they holding off or are they charging ahead? And if you're supplier, how are you actually helping your builder partners navigate this? Is there any suppliers out there that are openly helping and having conversations with our build community or the broader build community around what's going to happen and how they're planning for this. It's a pretty crazy time to be in building as it always is. And we thought these two particular subjects were very important to note. as they're gonna impact the industry greatly. So we're gonna keep dropping some more articles, some more insights on this, but we'd love to hear from you. And don't forget to like and subscribe to our channel and we will catch you on the next podcast. So until then, catch you later guys. See ya.