Hollowed out workforce concerning

Well known demographer and The Demographics Group Co-Founder Simon Kuestenmacher presented to the Property Council of Australia recently, and a number of his observations are illuminating for the property sector, as well as the broader economy.

One of the trends he explained, based on employment data produced by the Australian Bureau of Statistics (ABS), is a hollowing out of the Australian workforce based on skill level.

For example, the number of doctors, engineers and others assessed to be skill level one increased five percentage points to 32 per cent of the workforce from February 2019 to February 2020.

Similarly the number of sales assistants, cleaners and cafe workers – assessed as skill level five – increased by about three percentage points to 16 per cent of the workforce over the same time period.

But when workers in skill level three are considered – for example, electricians, mechanics, butchers and other trades – the number dropped three percentage points to just 15 per cent of the workforce.

This hollowing out of the workforce has many impacts, but the one that concerns me the most is the lack of trades and the effect it is having on construction costs and construction times.

At a time when supply constraints in the housing and apartment sectors are becoming critical, access to ready labour is becoming increasingly problematic.

REIWA estimates Western Australia currently needs an extra 8000 homes to restore equilibrium and to end the rental crisis – and that is just the immediate demand.

REIWA said the state needed 19,500 homes to be built every year to keep up with population growth and the demand from current residents.

However, the ABS data shows that WA saw less than 14,000 new homes – houses and apartments – delivered in 2021 because of the supply and cost constraints being faced by developers and builders.

Even for those who have saved enough deposit for a new house and land package, there are many anecdotal stories where buyers are still facing lengthy delays and cost increases.

An article published by the Australian Broadcasting Corporation, documented a couple that signed up for a package in late 2020 to take advantage of the $20,000 State Government and the $25,000 Federal Government stimulus grants, which were designed to keep the construction industry alive during the COVID-19 pandemic.

Although the slab for their new house was laid in September last year, allowing them to qualify for the grants, and some of the brickwork commenced later in the same year, the building site has been vacant since then.

Yet, since they signed their contract, their builder had notified them of two price increases and two contract extensions.

Even when the construction of a new house and land package goes smoothly, a delivery timeframe of more than two years is becoming more and more common.

With the uncertainty of cost and time to build a house, the natural progression and an alternative choice for people wanting to move into a newly constructed home is to consider an apartment, which they can secure at today’s price and settle in 18-24 months.

However, not all apartment projects come without risks and one should carry out due diligence and research into a developer’s track record, as well as the construction firm engaged to complete the development.

We are increasingly seeing potential buyers in this market concerned about construction commencement and delivery.