Billionaire Gerry Harvey says building new property in Australia has “never been more difficult”.
The 84-year-old co-founder of Harvey Norman said rising construction costs had made new property developments increasingly unviable.
Although he is best known as the founder of home goods retailer Harvey Norman, along with his wife and CEO Katie Page, Harvey has also invested in real estate.
Harvey said he had been forced to put several of the sites in the “too hard basket”.
“The biggest problem I have with property is that I have a lot of developments I want to do but the costs are too high,” Mr Harvey told the Australian financial review.
‘I won’t make money if I do the development. “It’s never been more difficult in that sense.”
Harvey, who has amassed a fortune of $3.39 billion according to the Financial Review Rich List, believes there is no sign of any improvement in the construction outlook.
The businessman suffered a blow after a proposed 20-unit project in Sydney’s Elizabeth Bay was rejected after a court ruled it would result in fewer homes on the same site, with the current block containing 28 apartments.
Harvey co-founder Norman Gerry Harvey (pictured with his wife and chief executive Katie Page) said rising construction costs were making new property developments increasingly unviable.
Harvey said he was not worried about the rejection, as the project’s developers could submit a revised plan and a new application.
“I’ve invested in so many properties that it doesn’t matter,” the billionaire said.
Quantization firm RLB has forecast construction costs will continue to rise as inflation drives up materials prices and a shortage of tradesmen means the cost of subcontractors soars.
Those supply problems are exacerbated by rising demand for housing as Australia sees record levels of immigration.
Costs in Brisbane are forecast to rise another 5 per cent in 2025, according to the company’s latest quarterly report.
Meanwhile, in Perth, construction costs rose to 5.2 per cent and are expected to grow another 4.9 per cent next year.
In Sydney and Melbourne, costs are expected to rise by 4 per cent and 4.5 per cent respectively, following increases of 5 per cent and 5.5 per cent experienced this year.
RLB said cost increases across the sector were creating further uncertainty amid a series of business collapses and subsequent job losses.
Surveying firm Quantify RLB has forecast construction costs will continue to rise as Australia faces a worsening housing crisis (pictured, aerial view of Melbourne)
“Developers are currently taking a more cautious approach, including delaying or canceling projects,” the report says.
RLB research and development director Ewen McDonald said construction was currently experiencing a multifaceted and challenging landscape.
“Skilled labor shortages are a major concern, driving up wage costs and creating intense competition for available workers,” Mr. McDonald said.
‘These factors are putting considerable pressure on project budgets and timelines.
‘While prices are stabilizing in some regions, overall market conditions remain challenging due to labor shortages, rising costs and strong demand.
“The construction industry is likely to continue to grapple with these pressures, although the extent and impact will vary across regions.”
It comes after east coast developer Bensons Property Group entered voluntary administration on Friday amid “extremely difficult” conditions in the sector.
BPG is currently working to build 1,337 apartments in Victoria, Queensland and Tasmania worth $1.5 billion.
BPG will propose to creditors to continue trading during the administration period.
“This will ensure BPG employees, trade creditors and people who have purchased apartments are protected, and its $1.5 billion development pipeline will be delivered, meaning more than 1,000 new homes across Australia,” he said. in a statement.
“There are no plans for layoffs and, importantly, BPG does so with the support of its founder, its key lenders and investors.”