To Build, or Not To Build?

Victoria - that is the question.

Considering we are once again experiencing tighter restrictions, we have taken the time to answer some pressing concerns that have arisen in regard to the state of the construction industry. We have spoken to Evan Catthart from Blue Earth Group and Richard Ji from Impact Homes about how COVID-19 has affected construction in Victoria, including how the virus has affected the supply chain to how the Government stimulus packages have had an impact on the industry. 

Here is a summary of what Evan and Richard had to share with us.

How has the construction industry been impacted by COVID-19?

The construction industry hasn't been majorly affected by COVID-19 and if anything, the residential property market has picked up it’s pace, contrary to what many people have been assuming. Construction has not come to a halt in Victoria, and in terms of the residential market, all builds are on schedule- it’s all going according to plan.

Blue Earth Group has been working with the same builder, Hamilton Marino, for 15 years, and their feedback is that COVID-19 hasn't really had an impact on their productivity at all. It has changed the way that they do things, but some of their projects are moving quicker than usual. There is no traffic on the roads and they are just having a great run at the moment. 

Some people are worried about the supply chain with building materials, what are your thoughts on this?

There are some materials that have slowed, but we are not seeing any major delays at all. Most builders have extensive supplier relationships and are able to pick up supply where it might have slowed in other areas. Builders have had to be nimble with their procurement and potentially source some supplies from other places. All of our suppliers are ahead of the game, they have stocked up to counter any shortage that could potentially occur. People seem to have the wrong idea about the supply chain, many seem to be in panic mode about it, but in reality, not much has changed. 

Is infrastructure going to slow down in Victoria?

No, definitely not. The Government’s infrastructure projects are still moving and obviously, they are a big source of employment for the state - that has been a big driver behind wanting to keep those projects moving, and not closing them down. The City of Melbourne has put measures in place to fast-track construction projects, save jobs, and help limit the economic impact of COVID-19. Construction in Victoria is not going to slow down, if anything the pace is going to increase. From an investor's point of view, markets are not slowing down either. We haven't seen a slow down in terms of construction time frames or in sales and in regards to sales, we've seen the opposite.

How has the Government's financial support impacted the construction industry?

JobKeeper has definitely assisted to keep people in jobs and to keep a bit of a lid on unemployment, which has been really important to maintain confidence in the market. If we saw unemployment at a rate of 17% as was initially forecast, that would have had a huge impact on confidence.

What we are seeing from the HomeBuilder Grant is that regional property prices are going up because there is such a high demand for property, especially in regional areas of Victoria. First home buyers have a lot of support from the Government at the moment, and many are flocking to regional areas seeking affordable prices. There is a limited amount of stock available, and as areas like Bendigo and Ballarat are in high demand, we are seeing property prices increase.

What is the aftermath of COVID-19 looking like for the industry?

After the first wave of restrictions, we had some strong traction, and that is a sign that when there is a level of certainty in the market, people do act quickly. There is still a lot of money in Australia and people are turning to property as an investment class over shares which have been very volatile during COVID-19 period. The aftermath of crises such as the Spanish Flu and WWII saw migration into Australia hit absolute record highs. This is what we are expecting to see post COVID-19 too. Australia has performed really well on a global level and once the uncertainty has gone and population growth comes back in a big way, we are going to have a really strong market. Smart investors are recognising this and investing now. The market will come back, there is absolutely no doubt about it.

We hope that these comments from both Evan and Richard bring some clarity on the current state of the construction industry in Victoria. Should you have any further concerns, please don’t hesitate to contact myself or Phoebe directly.