Building more houses quickly is harder than it looks

From The Conversation:

Thanks to HomeBuilder and the housing price boom, house building is experiencing its hottest year on the record.

Over the space of a year the number of houses (not apartments) under construction has jumped from 56,060 in the June quarter 2020 to 88,445 in the June quarter 2021 — the biggest peak of all time.


Houses under construction

Australian Bureau of Statistics

It would be entirely reasonable to expect the record number under construction to be converted to record completions. That’s the point of construction.

But bizarrely, the same set of Bureau of Statistics figures show no such thing. Even after an enormous jump in construction, and all through previous jumps in construction, the number of houses completed each quarter has changed little.

In this year’s June quarter, it was 28,399 — little more than the quarterly total at any time over the past five decades.

It is as if starting building is one thing, and finishing it is another.


Houses under construction, houses completed, quarterly

Australian Bureau of Statistics

The 88,445 or more houses presently under construction will eventually be built, but it is going to take seriously longer than normal.

Our research shows every time the number of houses under construction has peaked, completion times have blown out.

During the smaller 2001-2008 construction boom, the average completion time blew out from 5.2 months to seven.

Our projections suggest this time it will sharply blow out from 6.5 months to more than nine by the end of this year.

The impact will be felt by hundreds of thousands of Australian house buyers, builders, subcontractors and lenders.

Why can’t we build faster?

Houses are not built on production lines. Unlike other universal purchases such as cars, each house is built individually.

And the method hasn’t changed much in 100 years.

The people we call builders are better described as project managers who rarely employ in-house tradespeople or have long-term contracts with subcontractors.

The way they manage the process has not changed much since the introduction of construction checklists by AV Jennings in the 1970s.

The method is hard to scale up, and unresponsive to demands for speed.

It is ripe for innovations such as offsite construction and prefabrication, but it isn’t clear the authorities are especially aware of the problem.

Now would be a good time. Builders could absorb the costs of changing processes while demand was high, taking advantage of the changes when demand recedes.

But I’m not hopeful. Too much talk is about housing supply in the abstract rather than how to achieve it concrete.

Comments

  1. Fishing72MEMBER

    Waiting time for materials is out of control. Several people I surf with are building places and don’t expect timber frames till after Christmas holidays. They’ve already been waiting a couple of months.

  2. I’ve talked with several prominent house builders about construction automation / robotics and to be honest they’re just not really interested.
    There’s a lot that can be done fairly cheaply but today all of the available automation solutions require that sub sections of the house be craned into place. The crane hire / operation costs typical eat up all of the savings.
    There are several so called 3D house printing solutions under development but again, they are for the most part unsuited to integration with existing building methods and you’re on very uncertain legal ground if an on-site accident / injury occurs which somehow involves the Automated equipment.
    Basically the site needs to be either fully Automated or fully manual.
    Anyway that’s my experience. It’s a pity that Australian construction workers are not embracing these technologies because construction automation is coming whether we like it or not. If we embrace these emerging technologies then we become the default experts and develop most of the valuable Intellectual Property.
    Alas this is Australia. I just need to keep telling myself this again and again …and again

    • We have the Hadrian X here in perth and its got a contract to construct 8 two story houses, does a fair chunk of the construction too. An outlier but a nice one to see.

    • Crane hire surely can’t be that cost prohibitive. I’ve watched enough Grand Designs to know that once the slab is down many of these prefabricated homes have their wall structures up in one or two days. I watched an episode the other day with a house manufactured in Poland in a factory which is mostly automated. The pricing was exceptional relative to what you would pay here for similar standard. I was honestly astounded at how far ahead they are.

      • Frank DrebinMEMBER

        Why hasn’t pre-fabricated housing caught on here in Australia ?.

        It seems like a no-brainer when you look at how Europe can pump out quality housing in a very short timeframe.

      • I don’t want to be in the actual construction business so I just listen to what my potential customers tell me…and they’re not interested
        It seems like the rules wrt things like electrical wiring and Plumbing already embedded in prefab walls is a real grey area that they don’t want to touch go there.
        similarly the recommended way to couple together prefab sections of house with wiring and plumbing embedded in the walls is a big unknown that breaks certain Electrical and Plumbing conventions although nobody can point me to the exact rules that are being broken…it’s sort of one of these …”that’s just not the way we do it here” statements

        You’re probably wondering what this has to do with Cranes
        The answer is that Cranes are a cheap solution if you can get the whole house assembled lego style but cranes are an expensive solution if each block you slot into place needs to be connected to the neighbouring blocks by onsite tradies.
        tardies waiting for the crane followed by Crane waiting for the tardies ….

    • Why would you automate? I’m not sure automation is coming; there’s a lot of incentives to not automate anything in that industry. Tradies enjoy:

      – Natural economic protections: Their output as long as it is manual can’t be outsourced and/or imported very easily. This means that they, unlike many other professions, keep us with the “actual inflation rate” more than most jobs. It’s not like I can build that house overseas. If I do find a way to “ship houses”, even as a local project manager why would I want that? I donm’t want global competition. I’m not that efficient either and am probably only competitive in the local market.

      – Demand is inelastic for homes typically; which means the buyer often bares the cost of any increases rather than the builder (they can pass the cost on). What motivation do I have to reduce my costs when it doesn’t change my financial position materially?

      – Experience benefits their job, their skills as long as they don’t keep up with the times don’t need to be updated. Unlike many jobs where constant learning is required experienced tradies can lean on their previous learnings for a lot longer. Why rock that boat with change (i.e. innovation)?

      – High labor costs and coordination/skills create a barrier to entry which means I get more business. I can’t just assemble my own house. I need all these skills to build it. That creates more wage pressure, and higher economic rents from the end result. It means people need help from a builder or firm to get things coordinated and done.

      – Housing is one of those superior goods, like a Gucci bag, or whatever. Paying more confers status onto the buyer. Why ruin that?

      – Many tradies, and builders don’t even want to train their competition (i.e. apprentices). Unlike say corporations who have an incentive to train to increase the supply of labor (with migration they have another way) very few want to train someone that competes with themselves for their own work. Why create competition for themselves?

      The aussie tradie has a pre-globalisation/union like job where the people who do it know its all about the dollar/margins rather than innovation. They haven’t bought into the innovation hype – they work to live, not live to work. I would say while not popular, and could been seen as lazy is a very rational decision. It shows in their profit growth, in the tradies utes/jet ski’s/etc. Competition/innovation is for losers as they say.

        • I guess I don’t see any reason to ever expect automation in that industry; not at least anytime soon. The current status quo suits the main players in that industry from owners to workers. Setting up automation is also quite an initial expense meaning new entrants are unlikely to do it (i.e. a new disruptor with little to lose will be unlikely). It has to get to the point where automation is significantly cheaper than the alternative for most standard builds before it takes off.

          Talking to many tradies they think most people’s jobs will be automated way before theirs with one even telling me “the computer guys who automate stuff will get automated away before we do”. They stand to benefit from this as everything else gets cheaper, while their product still commands high costs. They don’t want automation – I’m agreeing with you that they aren’t really that interested and prefer the status quo for as long as it can last for.

  3. not to mention many of them 88,000 under construction are on 200 sq m plots with 2 storey homes already on either side, meaning there is no laydown areas and trades are not even able to walk around the perimeter of the house being built… sardine style. slows down the entire build by a significant factor.

    Lots of opportunities exist in pre-fabrication, its still very much under-utilised in Australia

    • Agree. Signed contract last weekend for a 224.5 sqm pre-fab house. It gets built in the factory at the same time as the building application goes through council – 12 weeks til delivered on site, then 4-6 more weeks for painting, raising hinged roof etc

      • Frank DrebinMEMBER

        Why was the rough cost of that little number if you don’t mind me asking ?.

        Really interested in this pre-fab stuff.

        • Base cost was $320,000 all inclusive, but with BAL 29 build plus verandahs, 24 deg pitched roof and extra double glazed windows, extra aircon etc came to $400,000. Probably a bit more to come with internal upgrades…co is in Swanhill Vic

  4. Quite possibly builders dont want to speed up, as much as cant. Regularly hearing of 12 mth waits on sunny coast at present. Stretching the work keeps the cash flow rolling into next year, and possibly gets them past the price hikes and delays in materials (hoping) that they are all complaining about.
    Give time to lobby for the next govie hand out also

  5. So, yeah, demand basically always outstrips supply.

    Prices go up.

    Thanks.

    …but, sure, pollies, just keep trumpeting supply-side fixes to housing affordability issues…