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More than 600 development professionals gathered at The Developers’ Forum in Sydney on August 24 to discuss the future of the construction industry.
The event, powered by The Developers’ Forum board member Assetline Capital, focused on ways to empower and support an industry beset by a “perfect storm” of rising costs, labour shortages, construction delays and insolvency risks.
As yet another homebuilder went into liquidation in Queensland that day, it was a timely reminder of the importance of paying close attention to every aspect of business governance—and continuing to strive towards higher standards.
In his presentation, NSW Building Commissioner David Chandler, OAM, said he was “sensing a prouder industry”.
“Small and mid-sized developers and builders are the foundation of our industry. They are where innovation is happening,” he said.
“And together, we have set a new direction.”
He emphasised that the sector should think beyond minimum compliance to best practice.
“It’s about exceeding what you think you can do and finding a new level of better every time,” Chandler said.
“Because the best will prevail; they’ll get the best workforce, the best design practitioners, the best supply chain and the best financiers.”
Having spent several years focusing on ensuring building quality during construction, the sector can now expect the auditor’s attention to shift to what happens once those buildings are completed.
“The best players will be customer-centric,” Chandler said of this transition towards a commitment to future building care.
“We need to do what we can to help customers get better outcomes.”
Openly sharing a commitment to third-party certification is one way the industry can give customers more confidence, particularly following a series of high-profile serious defect cases in NSW.
Safework and NSW Fair Trading’s Matt Press said Construct NSW’s recent consumer confidence survey revealed just 38 per cent of prospective apartment buyers were very or extremely likely to buy an apartment off the plan—24 per cent say it’s because they don’t trust developers and don’t believe the apartments are well constructed.
The NSW iCirt star-rating regime, a new data-driven tool created by Equifax, is one way to give consumers more confidence.
It assesses a business across six criteria: character, capability, conduct, capacity, counterparties and capital.
With construction insolvencies 47 per cent higher in April, 2022, having visibility over cash flow and financial capacity, as well as risks of related parties, can be a game-changer.
And not just for prospective buyers—wider adoption of visible credentials could help all players in the industry make more accurate risk-based decisions around who they work with.
Assetline Capital Managing Director—Lending George Khoury emphasised the role of financiers in helping mitigate cash-flow and compliance risks throughout a build.
“Being a lender, we are the conduit to the project’s success: We work with the builder and developer towards the ultimate outcome of a successfully delivered project,” Khoury told the audience.
“We've seen these cost increases coming well ahead of time and we've worked with our borrowers very carefully to manoeuvre through those issues to make sure they are in the best position to deal with them.”
He described Assetline Capital’s ‘active lending’ approach to construction finance, which includes six in-house project managers who visit every site every fortnight.
“At any stage of the project, we're very in tune with what the risks are, what the costs are, where the builder is up to. That has proved to be our success of late.”
Assetline’s project managers are also fully across the latest legislation changes and ensure the sites they are funding are compliant.
And through a robust due-diligence process, its credit committee also assesses many of the same qualities covered by the iCert system—for the developer and the builder—because the non-bank lender understands how to identify and manage those risks.
“We build contingencies into our construction finance, to provide that funding headroom developers need right now,” said Khoury.
“And if a problem comes up, we’re already across what’s happening on site. We can work out a solution together.
“It’s about being overtly transparent.”
Creating a customer-first culture that prioritises quality was a clear theme in every presentation during the evening. Finding ways to continually improve is not just good for home buyers—it’s also better for the bottom line.
With developers only too aware of the impact of significant cost increases on their profit margins, Press shared a timely reminder.
“We costed-up a sample of work that had to be done to remediate serious defects and it ended up being about 13 per cent of the contract price—an average loss of $36,200 per apartment.”
That doesn’t include legal costs or damage to reputation. Plus, repair work is often where safety issues arise.
Press urged attendees to reflect on their business discipline and standards “because if you truly want to be the best, you need to get it right from the start—and keep a close eye on waste, contracting, safety and governance.”
In his keynote address, Professor Mike Kagioglou, Dean of Engineering, Design and Built Environment at Western Sydney University, told the audience that change didn’t happen by chance.
“Being compliant and leading the industry are not mutually exclusive,” he said.
“We need to recognise the culture that exists in this sector, and take the next steps towards improvement.”
He suggested looking beyond individual company performance—productivity, profitability, health and safety—to measuring the impact of the industry’s work on people and the environment.
“We can do this as an industry, bring organisations together to create alliances and change the culture,” he said.
“And that’s the challenge for all of us: industry, academia and government.”
To learn more about Assetline Capital’s construction funding solutions, visit assetline.com.au/construction-loans.
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