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This week in home building news! Catch up with Az and a colourful array of guests, to hear about who's killing it, who's innovating, and who's getting into strife in the world of new home construction.
Az (00:00)
The Reserve Bank has just lifted interest rates for the fifth time this year. The Housing Industry Association says new home sales are at their lowest level in 18 months, and the RBA is hearing something interesting from builders. They're busy building homes sold months ago, but the next round of sales is certainly slowing, and we're hearing that here at The Good Builder. So here's the question: Your pop line might look healthy today,
But what happens when those jobs finish and the next lot aren't there?
G'day, I'm Az. This is the Good Builder Podcast, and I am back for you Monday with a solo episode. And there's been plenty happening around the housing market this week. And I want to talk a little bit about what it actually means for builders out there, not just the interest rates or approvals, but something I reckon deserves a bit more attention. How certain are you about where your next jobs are coming from?
Because being busy today and having a healthy pipeline for the next six months are two very different things. Now there's a few warning signs that are there, and let's start with what happened this week. On the third of November, the Reserve Bank announced another 25 basis points increase to the cash rate from 4.6 to 4.85%. percent
That's the fifth increase this year, and six members voted to increase rates, while three wanted to leave them unchanged. The Housing Industry Association also weighed in on this. In their third of November release, higher rates, fewer homes. the HIA said new home sales in the September quarter remained at their lowest level in eighteen months.
And it's forecasting Australia could fall around 200,000 homes short of the National Housing Accord target of 1.2 million dwellings if the current trajectory continues. Meanwhile, the Australian Bureau of Statistics reported that total dwelling approvals actually rose by 5.1% in September. but
Private house sector approvals fell 5.3%, while approvals for dwellings other than houses rose 16.6%. So that's not the same story across every part of the market. But here's what actually caught our attention here at The Good Builder. in its November statement of the monetary policy, the RBA shared findings from conversations with around 240 businesses.
industry bodies and other organizations between early August and the end of October. And the message coming from the residential builders was very clear. Current construction activity is holding up largely because of the home sold earlier, but forward sales are slowing. Builders in Sydney and Melbourne reported about six months of work ahead compared with longer pipelines elsewhere.
And some contacts were reporting buyers taking longer to make decisions, weaker sales, and more contract cancellations. These are observations from industry contacts, not national cancellation statistics, however. Now, if you have a think about what that means, you could be absolutely flat out today with supervisors running between sites and trades booked out for months.
But the work keeping everyone busy was sold when conditions were much, much different. And the next lot might be coming through at the same pace. And that's the biggest risk for the industry. Not necessarily what you're building today, but what you're going to be building next.
And there's a few things that we want to tell you that you should have a look at this week. Now, the first thing that I would do is take a proper look at your pipeline. separate signed contracts from genuine prospects and early inquiries, then put realistic start dates against each one.
Because someone asking for a rough price isn't the same as someone that's ready to sign. And when you're counting both as future work, your pipeline might look healthier than what it actually really is. The other thing that I see a lot of builders do is they start worrying about future work and the first reaction is to spend more money on marketing, more advertising, more social media, more inquiries. And sometimes that's exactly what's needed, but I'd be asking another question first.
What are you doing with the inquiries you're already getting? Let's say you're a custom home builder. You're getting people through the website, they're looking at your projects and they're reaching out, but very few are progressing. Maybe their budgets aren't realistic, maybe they're still deciding whether to build, or maybe they don't understand your process or what your homes typically cost. You could spend more money bringing in another 20 people through the door who are gonna feel exactly the same way.
This is where I think builders need to look at their marketing and sales together. Your marketing should attract the right people and help them understand what you do and who you build for and how you do it. And your sales process should help people make the informed decision. Neither should rely on luck. So here's action number two. Go back through your last 10 inquiries. Where did they come from? Were they the right type of client?
Did they progress to a meeting or proposal? And if they didn't, why not? You might find you're attracting the wrong people or you might discover you've got some pretty good opportunities that simply haven't been followed up and been progressing the right way.
Either way, it's probably better you know this than go and spend more money on marketing.
The third thing that you should actually do is have a look at your actual sales process.
Now we're not talking about turning builders into pushy salespeople. We're talking about making it easier for someone to be interested in building and to be making a decision.
Imagine a couple contacts you about a new home, you have a good conversation, the project sounds promising, and then you tell you and then you tell them that you're gonna get back to You get busy, a problem on site, client needs something, trade hasn't turned up, and before you know it, a week has passed. The couple might still be interested, but they don't know what's happening next, and they might be talking to another builder, and neither really do you.
So that's not necessarily a lost job, but it's a lost opportunity or an opportunity that's gone quiet. And I reckon that happens often enough and it's pretty hard to know what your pipeline looks like if you're not managing your sales process properly. A decent sales process doesn't need to be complicated either. Who's responding to inquiries? How do you work out how someone's a good fit for your building business? What's the next step? And who's responsible for following up? It's all fairly basic stuff.
But it's often the basic things that slip when everyone gets busy. And we've seen that a lot here at The Good Builder. So action number three is pretty simple. Write down what happens from the first inquiry through to a signed contract and make sure every genuine opportunity has a clear next step and someone responsible for it. And don't be afraid to rule people out. Not every inquiry should become a job. And we've had plenty of builders on the pod talk to us a little bit about that.
Now they're the three sort of things that we would have a look at, Especially at this time and what's happening in the current market conditions and what we've been hearing through the industry, chatting with builders all out there. But there's something else that we thought was worth mentioning for Queensland Builders specifically.
Business Queensland has opened up applications for a construction software rebate of up to $5,000, excluding GST for eligible small and family construction businesses. It covers approved business management software and related training. Applications opened on the 6th of November and they close on the 7th of May next year unless the funding runs out earlier and there are eligibility requirements. The products must be in the government catalogue.
and you need approval before purchasing anything and applying doesn't guarantee the funding. Now software won't fix a poor process, but if you're reviewing how your business manages inquiries and jobs, it's worth looking into a platform because it does make it a hell of a lot easier. But just get your process right first. So just to bring it all together, the market news this week that we just went through tells us something worth paying attention to.
Builders can be busy today while future sales are already slowing and you don't want to discover what happens when your current jobs are finishing. Three things we'd suggest to do this week. First, audit your pipeline. What's signed, what's genuinely progressing, and what's still an inquiry. Second, review the last ten inquiries. Find out where they're coming from and why they're not turning into work or why they are turning into work. And the third thing, tighten your sales process.
Make sure every opportunity has a clear next step. None of that guarantees your next job, but it gives you a much clearer picture of what's actually happening in your business. And it's important when the market starts changing because you can't control interest rates or when someone decides they're ready to build, but you can control how well you understand your pipeline and how consistently you manage the opportunities coming through and bringing them through to a build.
I reckon that's what the real conversation needs to be this week. And you should be going and having a chat with all your teams out there. If you found this useful, please share it amongst someone out there, another builder, another trade, someone out there so they can get a bit of education from us here at The Good Builder. And if you haven't, please like and subscribe to our channel. I think I'm supposed to say that. Thanks for listening. We'll catch you on the next one. And we've actually got some really good ones coming up.
We've got Noah from Xact on Friday for our feature podcast. So keep an ear out for that. And then on Wednesday, we have ABBA from A to Z Homes, who is in New South Wales. And we met him at the professional builder event. It's going to be another big week. So stay tuned. Some great podcasts coming through. And we'll catch you on the next one. Thanks.