02/10/2007 - 22:00

Slow first starts bite

02/10/2007 - 22:00

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Maintaining a focus on Western Australia’s second and third homebuyer markets has proved a wise move for several builders featured in the annual Housing Industry Association Housing 100 report released last week.

Slow first starts bite

Maintaining a focus on Western Australia’s second and third homebuyer markets has proved a wise move for several builders featured in the annual Housing Industry Association Housing 100 report released last week.

Ranked 13 out of WA’s 20 largest builders, Collier Homes showed the largest percentage growth during the past financial year, increasing its business in WA by 78 per cent to 250 starts.

Other builders to post strong growth in 2006-07 include Scott Park Homes (up 25.3 per cent to 988 starts and ranked four), McGrath Homes (up 30.8 per cent to 302 starts and ranked 10), and Danmar Homes (up 35.8 per cent to 291 starts and ranked 11).

But for those builders with more exposure to the increasingly constrained first homebuyer market, the report shows a marked decline in housing starts.

BGC, the largest builder in WA and the nation, had 3,343 starts in WA last financial year, 36.6 per cent or 1,215 starts fewer than 2005-06. 

Its closest rival, the Alcock/Brown-Neaves Group, slipped a modest 4.6 per cent to record 3,312 starts over the period.

Showing the largest percentage drop in housing starts was the Summit Homes Group (ranked six), falling 65 per cent in 2006-07 to 685 starts.

Despite some good individual performances overall, the national market share of the state’s 20 largest builders fell 8.4 per cent to 14,631 starts in 2006-07.

The HIA estimates the top 20 group has the capacity to deliver an additional 1,500 homes a year.

JWH Group managing director Julian Walter said there had been a softening in housing starts due to affordability issues, with the first homebuyer market hardest hit.

The state’s third ranked builder decreased its activities from 2,053 starts in 2005-06 to 1,800 in 2006-07.

“We made a strategic commercial decision to stay out of that [first homebuyer] market. Inquiry rate has been dropping 20-22 per cent every year,” Mr Walter told WA Business News.

“The biggest constraint last year was that land was not available because people were waiting six months for titles. We could have had 500 more sales if not for that.”

JWH expects to reach 2,000 starts this financial year, having already locked away six months worth of housing commencements.

“We saw a softening in sales in June and July this year but that will pop out in February and March next year as the building pipeline picks up,” Mr Walter said.

He predicted first homebuyers would come back into the market next year, taking the proportion of these buyers in the market to 28 per cent from a low of 12 per cent this year.

Scott Park Homes general manager Joe Marchese said the company would continue to target second and third homebuyers, achieving an average contract amount of $210,000.

“We believe there is a fair underlying demand for housing and attribute our growth to good customer service and at the same time enhanced specification levels in our homes. By continuing on with this formula, I think we can beat our starts this year,” he said.

Also staying away from the first homebuyer sector are Danmar Homes and Home Australia subsidiary, Collier Homes, the former servicing the second, third and fourth homebuyer markets with homes worth less than $750,000.

Danmar Homes construction manager Rob Williams said the company’s 35 per cent growth this year was the result of significant multi-unit projects.

“During the past six months, the market has stabilised and the availability of stock has improved. I think the market will continue to be fairly healthy. In some areas it’s as busy as ever, but the first homebuyer market will continue to struggle with land prices the way they are,” he said.

Established 14 years ago, Danmar Homes has a display home on Northport Boulevard near Port Bouvard and is planning to open others in Mandurah and Perth’s northern suburbs next year.

“Our only constraint really is the size of our office. We’ve just advertised for six more staff and may look for more staff at the end of the year,” Mr Williams said.

Home Australia managing director Bob Day, owner of Collier Homes, said the 50-year-old company had become a “category killer”, by target niche markets with quality designs.

“The company has been through some significant manifestations over the decades from being the big volume builders for first homebuyers in the 1980s to the new ‘category killer’,” he said.

“We have a bigger market share in the smaller market segment of second homebuyers, typically pricing homes between $200,000 and $250,000.”

Mr Day said the housing industry in WA was a standout in the nation, but was suffering from a planning-induced affordability crisis.

Collier Homes could have doubled its 250 housing starts last financial year, had it not been for the land supply problem, he said.

“Housing costs have not changed in 20 years. If not for the restrictions on land supply, the housing market would be significantly better off. When I see the new home prices I shake my head because they are the equivalent of 20 years ago.

“Price of land back then was $20,000 to $30,000, and now its $300,000. It’s terrible that the situation is denying a whole generation of people a home of their own.”

The company is aiming to achieve 300 starts for 2007-08.

Making its return to the list of WA’s 20 largest builders is Bay Mist Pty Ltd, the parent company of established builder, Independent Constructions.

Independent has built several multi-unit apartments for Finbar Ltd during the past 17 years, and its most recent flurry of activity has kept the small building company extremely busy.

Independent Constructions managing director John Orr said the company liked to keep a low profile, and was moving in the direction of more specialised housing projects.

“I’m at an age where I want to just focus my energies on four to five special projects a year.

“Our level of inquiry has got to the point where we’ve almost got to knock it back.

“It could get out of control if we took on any more. I want to keep delivering the same level of personalised service.”

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