Union go-slow on Queensland sites squeezes housing supply: developers
Queensland union rules that restrict working days on building sites are worsening the state’s housing crisis, making it unviable to develop anything other than premium apartments for wealthy downsizers, a developer executive says.
Consolidated Properties chief executive Don O’Rorke said his sites operated four days a week on average, putting them “at the top end of productivity in Queensland” – but with even that relatively strong performance, he had to focus only on premium apartments.
Poor productivity is one of a number of factors, including unseasonably wet weather, that have given the host state of the 2032 Olympics a wooden spoon in the national construction efficiency race.
This week Dexus chief executive Ross Du Vernet told the Financial Review Property Summit that major Queensland construction sites are being obstructed by union-backed rostering.
On some big sites, that resulted in 2½ days a week of work, he said.
O’Rorke said such poor productivity overall had made housing less affordable.
“We could produce our apartments for 20 per cent less in terms of sale price if we got five days a week versus four days a week,” he told The Australian Financial Review on Wednesday. “If the weather was kind to us, that would be one thing. If the EBA framework was reformed to enable sites to stay operational for five days, it would be another big point.”
Master Builders Queensland said that state procurement rules, particularly around the so-called Best Practice Industry Conditions, introduced by the former Labor government, have been temporarily paused but need to be permanently scrapped.
“When they were in place, up to 96 working days were lost in a calendar year because of a lack of flexibility in the use of rostered days off and working hours generally,” said Dyan Johnson, MBQ general manager of policy and advocacy. “If BPIC was exercised to its full extent, the cost to build a two-bedroom apartment blew out by 33 per cent – from $870,000 to $1.16 million.”
Conditions in the Sunshine State were laid bare in a report by the Queensland Productivity Commission in July, which found that construction, an industry employing 10 per cent of the state’s workforce and accounting for 7.9 per cent of total output, had suffered a 9 per cent decline in productivity since 2018.
“This means the industry today needs 9 per cent more labour than it did in 2018 to produce the same level of output,” the commission said.
That’s not only limiting what Queensland developers produce. It’s preventing new ones from starting projects, even as they say the state’s population growth and undersupply of housing give it one of the best long-term growth prospects in Australia.
“It’s the toughest market in Australia right now to develop new housing,” said Dan McLennan, the co-chief executive of build-to-rent developer and operator Local, which last month expanded into Queensland for the first time when it acquired a 3 per cent equity stake and the management rights of Smith Collective, a 1252-home community in Gold Coast.
“It’s so much harder for the simple reason that you’ve got very, very expensive construction relative to other cities. It costs 20 per cent more for us to build an apartment in Brisbane than it would cost to build an apartment in Melbourne or even in Sydney.”
Another big hurdle for productivity in the state is the sheer lack of workers in South-East Queensland, according to Mosaic Property Group managing director Brook Monahan.
“The biggest issue is the labour force required to meet the demand for housing and all of these other competing priorities, along with the Olympics’ infrastructure program,” Monahan, who founded the builder-developer, told the Financial Review.
“Modelling shows that labour demand will peak in 2027/2028 and in the construction industry, labour needs will continue to exceed supply right through to the Olympics in 2032, with a shortfall of between 50,000 and 70,000 workers. We cannot build without these workers, and the construction industry is already beyond full employment.”
The Queensland industry needs more skilled workers. The Productivity Commission report said that the state has only been allocated 100 skilled construction workers a year, out of a national total of 26,260 last year.
And while such constraints remain, developers will limit their activity.
“We will only allocate capital to apartment projects on super prime sites that we can sell at high prices to baby boomer downsizers,” O’Rorke said.
“It costs the same to build an apartment building on riverfront as it does across the street. People aren’t going to pay the prices we need to justify the cost of inputs unless it’s on the riverfront.”
