Why Builders Aren’t Building
Home builders and property developers make their money creating new dwellings for Australian households. When they get it right, they can make substantial profits. But when they decide not to proceed with their plans, it raises important questions. Why are builders of major housing or apartment projects walking away from their plans? Why are big companies, which have spent years and millions of dollars planning a major project, deciding not to build?
The AVJennings Example
A recent example is the decision by AVJennings to abandon a major housing development near Caboolture in the outer northern suburbs of Greater Brisbane. This project would have added 3,500 new homes to an under-supplied market. Brisbane, a city with high demand and a serious shortage of homes, could have greatly benefited from this development. So why did a big developer with a proven track record and the capacity to deliver these kinds of projects make the decision to walk away?
The Answer: Viability
The answer lies in the viability of these projects. AVJennings cited massive cost escalations—including the infrastructure charges imposed by local councils and their long delays in granting approvals—as making projects like this no longer viable. The new construction code has added tens of thousands of dollars to the cost of building a house. This is just the latest example of politicians imposing new policies that add massively to the cost of creating dwellings at a time of extreme shortage.
Conversations with Developers
I have had discussions with developers who say that the cost of creating big residential projects is so high that it’s not financially feasible to proceed. They would have to place such a high price on the end product that no one would be able to afford to buy the homes. This is true for high-rise apartment buildings as well as housing estates.
The Bigger Picture
This situation provides further confirmation that all the core problems in the housing industry—dwelling shortage, deteriorating affordability, and the rental crisis—are all influenced significantly by our elected representatives. The policies and regulations imposed have a direct impact on the feasibility of new developments.
Navigating the Challenges with Buy Invest Live
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