Builders Reap Massive Profits from Construction Boom 3

Monday, September 26th, 2016
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Australia’s biggest home builders are cashing in on the  boom in residential construction, with the top 100 builders breaking ground on more homes than ever before over the last financial year and reaping almost $18 billion in revenue.

Unveiling its latest report on Australia’s most active home builders by number of starts, Housing Industry Association says the largest 100 home builders broke ground on 69,161 homes in 2015/16 – smashing the previous year’s record of 68,621 and coming in at almost double the level experienced three years

Revenue for the Top 100 also increased by 6.7 percent to come in at a whopping $17.777 billion.


Victorian based Metricon Homes took out the top spot followed by BGC (Australia) (WA), Meriton (NSW), ABN Group (WA) and Brookfield Multiplex (NSW).

Meriton surged up the ladder from fifth place to first as the Victorian builder increased its number of starts by almost 1,000 from 3,371 to 4,365.

MJH Group was the biggest mover, increasing its start numbers by 89 percent to go from 14th position to 8th.


Whilst large builders have obviously reaped considerable levels of reward from the boom in residential construction, the nation’s 100 largest builders actually ceded a small amount of market share over the past year, taking only a 30 percent share of the overall residential building market in 2015/16 as opposed to 32 percent last year.

This indicates that smaller builders are also benefiting from the boom in new home construction along with their larger competitors.

Perhaps surprisingly, also, the nation’s biggest home builders are not as exposed to the apartment boom as might commonly be perceived to be the case.

In fact, detached housing makes up almost three quarters of the top 100 building activity.

The latest results come amid a surge in new home building throughout Australia.

All up, HIA expects the overall number of dwelling unit commencements which took place throughout Australia to come in at a record number of 232,350 when the final results are released next month.

Whilst starts are expected to slow going forward, HIA says that the strong volumes of work in the pipeline indicate that activity will ‘not fall off a cliff’ and that housing starts will register another strong year of 209,050 next year.

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  1. David Chandler

    Andrew, sadly there is a difference between gross revenue and profit margins. The industry has a poor performance record in profitability. That goes from the top of the list down to the bottom. My recent article discussing the quantity of revenue and earnings was instructive. To me the real test is the quality of earnings. Judging the potential of a construction enterprise based on turnover (revenue) is risky. For those who have been around a while its essential to look at profitability over 5 to 10 years. The construction industry in Australia is still locked into a margin game mentality driven by its traditional approach to organising, procuring and performing projects. A modern industry will shine a light on costs and take a serious look at how much value is being trashed on the other side of the margins ledger. There is little challenge to the view that Australian construction costs are 15 to 20% too high. The only thing shielding this just now is low interest rates, run away residential construction and government (taxpayer) sponsored infrastructure which is the only thing propping the economy just now. That is unsustainable. The real test will be when record high construction and engineering prices come under the microscope when the music stops. The waste and inefficiency that can be observed across construction sites everywhere is mind boggling. What's funny is that despite record industry turnover (revenue), companies are making such shallow profits despite the risks they take on, and the ATO has so many construction enterprises on their watch list for potential failure in the next 12 months. And size of the companies on that list spans from tier 1 to startup. So we could conclude 'boom time' by another name.

    • Kerry Taylor

      Well said David Chandler. You touched on the list of companies the ATO are watching for possible failure. I recently wrote an article about the importance of profit margins over cash flow ( being what accountants deem more important).

      Recently a few newspapers printed where SV Partners accounting firm stated much of the reason for builders going into liquidation is due and I quote "Inadequate cash flow, high cash use and poor strategic management " They then recommended and I again quote "To reduce financial risk, we urge businesses to regularly report, produce and revise budgets and business plans to support financial projections and become more vigilant with receivables collections"

      These are areas that we at Bizprac software for builders are passionate about. Our mission is to stop builders going bust. The top companies know that good software will provide the financial control over a business and provide the necessary forecasting and reporting to allow a business to grow. It also allows a business to stay in control of finances during any downturn.

      Furthermore I agree we are still locked into the margin mentality game. We also need to break the mentality that generic accounting software will provide the needs of a construction business. Clearly generic accounting software doesn't; thus why so much data needs to be entered from one program to another to another and cross fingers there was not data entry error during this time. If there was an error then job costing and more importantly, forecasting is incorrect. This has let too many building companies down.

    • Tony

      Putting accounting software aside, the tax system encourages a short-term outlook that binds contractors into a 'tax-year' mentality. Combine this with the under developed business skills of +80% of the construction industry and it is no wonder that construction companies have one of the highest rates of insolvency in the country.