Over 100,000 people are directly employed in the Housing Construction industry in Australia, and if you include sub-contractors and those indirectly servicing the industry this number swells to over 300,000. As such housing is pivotal industry and has a significant influence on the Australian economy.
The health and direction of the industry is driven by a number of factors, including trends in dwelling approvals, the level of housing affordability in different markets, the level of mortgage interest rates and expectations on future movement of rates, population growth and the general ageing of the population. As such the businesses in this industry are exposed to building cycles and shifting geographical ‘hot spots’. Agility and flexibility are key competitive advantages that successful business must have to remain profitable over the long term.
In the late 2000’s competition in the industry intensified which, when combined with the general economic downturn, put downward pressure on profit margins. However things have turned around recently and average profit margins are climbing again. Growth in the industry overall is predicted at over 1.5% per annum over the coming five years.
There a several factors that are critical to the success of businesses in this industry. These include:
- Strong alignment with financial lenders to fund construction activities.
- Appropriate industry body accreditation and membership.
- Access to skilled subcontractors within appropriate timeframes and cost levels.
- Flexible operating structures in order to expand and contract with building cycles as demand fluctuates.
- Strong marketing abilities and skills to drive new business.
Overall this industry is highly competitive and very decentralised, facts not likely to change in the foreseeable future. A strong business plan, robust cash flow management skills, and flexible operating structure and critical to long term success.
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