The RBA has accidentally put its finger on the core problem for the fake left push to boost housing supply in response to out-of-control immigration-fueled demand.
The construction industry – in particular, residential builders locked in to fixed-priced contracts – continues to experience challenges.
A sharp rise in construction input costs, compounded by costly delays arising from labour and materials shortages as well as bad weather, has eroded profit margins on existing fixed-price contracts for many residential builders. Some builders are still working through these contracts, which are now loss-making for many. As such, the share of large residential builders with negative cash flows has increased sharply over the past couple of years (Graph 2.19, left panel). Higher interest rates have also raised debt-servicing costs for many firms. Reflecting these financial pressures, residential builders’ overdue trade credit balances to major suppliers have increased (Graph 2.19, right panel).
Building m material costs have improved but are still too high owing to the Alboflation energy shock for locally production like bricks and cement. While the falling AUD, again a feature of Alboflation, prevents the full transmission of price falls in globally sourced building materials.
Meanwhile, the massive infrastructure deficit triggered by Alboflation has prevented price falls for construction labour as tradies make out like bandits in public infrastructure projects:
As we know, Alboflation plans to add further pressure to costs by expanding public building projects. More from the fake left:
Senior lecturer in construction management at the University of Melbourne, Dr Paulo Vaz-Serra, told The Sunday Age “it’s clearly not possible” for the government to achieve its ambitious housing target with the current shortage of qualified labour.
“The 800,000 target is not based on an understanding of the current construction capacity,” Vaz-Serra said.
“Before starting on this ambitious program, they [the government] need to increase and incentivise young people to get into trades and combine that with an increase in immigrants with those specific skills.”
…The Grattan Institute’s Brendan Coates said that while Victoria’s construction workforce had the capacity to grow, the government’s residential building target would be difficult to achieve alongside its current pipeline of major infrastructure projects.
Nor would it matter if it did match. Each migrant adds more housing demand than labour supply.
Meanwhile, the Alboflation has increased interest rates, further pressuring construction company balance cash flows. As well as crushing affordability for new homes, limiting volumes.
There are only two ways out.
If Alboflation continues, the housing shortage will worsen with each passing day. Dwelling capital values will have to rise much further, pricing out a new generation of Australians. The eventual supply response will be muted and Phyrric, given it will still not have kept pace with demand.
Or, immigration is cut, construction costs are allowed to deflate, interest rates fall, and restored margins and affordability eventually lift dwelling construction volumes.
Guess which one the fake left is going to do?
