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There has been a bit of a gobfest over the last month regarding Home Affordability with Labour elevating the issue to the political arena. It's an issue which effects many Australians and relates to a large part of the Australian identity - of "owning your own home".
The Housing Affordability issue is complex, there are many factors and no quick fixes.
So, what are some of the causes?
- Escalating house prices driven by tax advantages is a big one (but political suicide),
- Increased income and household wealth
- We're living longer and getting older,
- Older home owners are remaining in their homes for longer
- More single person households,
- Reduced supply of low rent dwellings and
- the NIMBY (Not In My Back Yard) lack of acceptance attitude of low-cost housing in the community.
What factor that is not given enough attention is
- building industry innovation.
Building Industry Innovation - Current situation
- When demand outstrips supply then prices increase.
- Approximately 50% of construction costs are labour related (compare that to other industries!).
- Builders and trades are in constant demand
- Finding builders and trades is hard (less so if you use BANGitUP Trade Select)
- There is a construction industry skills shortage NOW and in the future. (Note: Even though there are kids wanting to get into the industry the skills shortage won't be fixed as many builders and trades tell us it is too difficult on their small businesses to bring on apprentices).
- There's competition for building trade resources from the mining sector, overseas (eg UAE) and neglected aging infrastructure.
So, there will be increasing labour cost pressure on new construction.
The market won't stand still and demand must be met - it will seek to adjust to decrease the labour pressure on projects.
Some possible outcomes
- Increased housing consolidation/ density - ie more townhouses, units
- Greater adoption of prefabrication methods including kit/ project homes.
- Changes to Government policy and planning
- Increased immigration of skilled workers (increase low cost housing problem)
- Increased adoption of technology
The old way vs the new way
Over the last ten years we have seen the Internet dramatically impact nearly all industries. This change has been driven from the bottom up.
Right now the building industry currently has the lowest level of technology adoption and service productivity but is on the verge of massive change. We are beginning to see the impact of mobile, easy to use, internet access infiltrate building sites across the country.
The industry is heavily fragmented and dominated by small business - any innovation must involve engaging the mass.
Over the next five years we will see increased industry productivity through the simple use of standard applications like email and search, and then towards more advanced applications like online collaborative project management, procurement and other community based applications.
This new way of building will see increased productivity, greater industry transparency, and lower the industry risk profile. Customers will demand expect greater communication and project visibility.
We will see an increased industry polarization based on building methods and technology - the old school vs. the new way.
If we play our cards right and facilitate technology adoption across the industry this will dramatically effect housing affordability, economic development and sustainability and our standard of living.
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