Brad Duggan on How Australia's Biggest Home Builder Survived

This week, we're joined by Brad Duggan, CEO of Metricon, Australia's largest homebuilder, at a time when the construction industry has been making headlines for all the wrong reasons.

In this episode, Brad pulls back the curtain on Metricon's $80 million turnaround, revealing the tough calls and bold strategy shifts that helped bring the company back from the brink.

We also dive into how the broader industry is being reshaped post-COVID, what investors and buyers need to watch out for in builder financials, and why partnerships like Metricons with Japan's Sumitomo Forestry could be the future of stability in residential construction. Music Welcome to the elephant in the room.

This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent, buyer's agent and buyer's agent mentor, co-host of Foxtel's Location, Location, Location Australia, author of Auction Ready and co-host of Your First Home Buyer Guide.

Hi, I'm Chris Bates, mortgage broker, currently ranked number three in the MPA Top 100 Mortgage Broker Awards. Before we get started, everything we talk about today is not personal advice, and we recommend you engage the services of a licensed and experienced professional.

Our guest today is Brad Duggan, CEO of Metricon. With a background in finance and decades of experience leading major commercial projects across the country, Brad has a unique vantage point on why so many builders are going broke and what it actually takes to survive and thrive in today's volatile market.

So we're very looking forward to a revealing conversation. Thank you so much for joining us today, Brad.

Thanks for having me.

Right. I think we should actually just start there, kind of finish Veronica's sentence there, where it's, you know, a lot of builders have not thrived. They haven't even survived over the last few years.

And I don't think we're really going to understand the gravity of that situation, you know, for the years to come. I mean, how bad has it been and what's made some survive and others not?

It's a weird industry where we have this juxtaposition between fixed price contracting and quite long lead times. And there was a period of stability that lasted quite a long period of time, probably close to two decades, where builders could predict quite easily what their escalation costs were going to be.

And then you hit quite a tumultuous and sort of unprecedented period of time with COVID. You had a war in Ukraine, which is where a large amount of lumber comes from. I'm not quite sure if many of your listeners would realize that.

But those two things alone, plus all the disruption of shipping, in effectively 18 months, you saw nearly 45% increase in input costs of both labor and supply.

And when you put that in an environment where you've guaranteed a customer's price and you've locked it in for 12 months, it becomes really difficult to manage those types of cost increases. Yeah.

Was there any sort of, I mean, obviously, you know, Porta Davis, you know, a lot of big builders sort of went under over that period. Was there any points, any builders that sort of just renegotiated contracts with a lot of buyers and how did some other, what were some alternative strategies they used?

Yeah, well, we took on a number of those Port of Davis jobs to get those customers out of the system.

And we did that just to get that out of the media cycle because no one was going to be inspired to build a home when there was so much noise about, you know, a thousand customers sitting out there.

So we did that to help, you know, not so much for a profitability point of view, but just to take the noise out. I think, you know, it was a difficult period of time for builders to negotiate.

And, you know, we're in a lot more stability now from where we were in the past.

I mean, it is interesting, isn't it? Because we've got a housing shortage. We've got governments at all levels crying that supply is the answer. Then you've got the profitless boom that we had as a consequence of stimulus, you know, with COVID. You have costs increasing, builders going broke, all this sort of stuff.

And then you've got a marketplace losing confidence. in the process and effectively the product, right? So I guess you've got all this stuff conflating. So I can understand it's quite a strategic move to step in to try to, as you say, take the noise out.

But Metricon themselves, you were really on the brink of the edge yourselves, right?

Yeah, yeah.

And so, I mean, you've helped lead that massive financial turnaround. What were the hardest truths that you've had to confront when stepping into that role?

I think the first was the grind. So we had to, you know, we'd made a lot of commitments to customers and back to Chris's point before, once we sign a contract with a customer and we're on site, there's no way we would ever think about repricing contracts.

There are a lot of builders, particularly in New South Wales, where that was a very prevalent thing. You know, people are stranded there. You know, you've got concrete poured, you've demolished the house, and then the builder turns up and offers $100,000 extra, you know, pricing to continue.

That was never, that was a non-negotiable for us. We would never contemplate that. The secret to success for us, Veronica, was just, first of all, the grind. We had to find a way to get to the end of that workbook that was caught in that.

fixed price contracting and large volume, large increases in costs. And to do that, we need to spend a lot of time with our supplier partners, a lot of time with our financiers, a lot of time with trade credit insurers just to say, look, things are going to be fine.

We need to work our way through that. And the grind was important. The other part of it is builders don't always make great business people. And there was a lot of redundancy in our business that had built up over a period of time. We're talking about

You know, two decades, 20 years of great success. And that had led to some largesse in our organization that we really had to cut back to, you know, focus on the fundamentals, you know, grind through that workbook, deliver for customers as best as we could in a pretty difficult situation.

and emerge as strong as you can be. And I think for us, you know, whether it's luck or great strategy, it's worked out well because, you know, we find ourselves in a great position today.

How many builders do you reckon, you know, in terms of your competition, if we, because, you know, it's a cash 22, right? If we've got a supply challenge, we've got home affordability challenge, we need builders, right?

And them going on, there's not, might seem like it's in your interest because you've got less competition, but it's not great for society as a whole. Like how much capacity did we lose in the, Particularly the house and land packages.

Yeah. I think it's about 7,000 over three years builders went under. Now, you've got your big sort of monsters like Porter Davis in that group, and that organization alone is 2,500 homes. That's crazy. That's a significant amount of capability that went missing.

The other thing you don't sort of, you know, you can't forget is the ripple effect that these builders have in communities. So you've got, you know, forever present for us during those difficult times was you got 6,000 jobs on sites, that's 6,000 families. You've got 2,000 employees, you got 25,000 subcontractors. It's like...

Not only do we need builders, but if a big builder fell over, the consequences for business, for the economy and for the communities, and in particular government balance sheets, simulation home warranty insurance, which they underwrite all those, it's significant.

You know, we find ourselves in a weird position now where there are fewer builders out there with the capability to make a difference in this housing supply, which is great for us from a competitive point of view, but not necessarily great for meeting what is a pretty significant housing challenge.

But with all those insolvencies, surely the market must be flush with staff, potential people to hire. So what's happened there? Because we keep hearing about shortages of skilled workforce, but you think they must be all unemployed. So what's the deal?

I think there's been a big dislocation. The southern states, Victoria, New South Wales, the amount of trades we lost to Queensland, it can't be underestimated.

Whether it was COVID lockdown considerations or the fact that it was just a more robust economy, and it is a more robust and optimistic economy right now in Queensland. It's not so much that – so there's one thing, there's just a dislocation.

A lot of them have gone to one location compared to others. And, you know, you hear builders talk about this all the time, but there's a lot of people in tunnels.

There's a lot of people working on these big building projects that, you know, the trades get great salaries, you know, working for us, but they make quite astronomical salaries working for these big build projects. And, you know, just like –

If you can recall, we did the saltwater plant down here in Melbourne. We lost a ton of trades there. And when they come back to the market, they've got to adjust to a different lifestyle because they're no longer earning the significant salaries they're earning in that government space.

But there are different skill sets, right? I mean, do they use carpenters building tunnels? I mean, you know, I mean, plumbers and electricians, like is it the same skill set that you can go and apply in a different job? How does it work?

Well, they're not deploying their skill set for on a car. Right. You know, so if you can get $180,000 standing next to a piece of equipment and your job is just to make sure that that equipment is secure. Right, okay. Yeah. You know, you're not using that skill set.

So, you know, that was a story. It was a very strong story in 2024, not so much in 2025. I think for where we are right now, which is actually record levels of building permits, the workforce is in a good position. Yeah.

It's just if there is a growth in demand, which there is undoubtedly going to be, how is the market going to respond to that?

My concern is that there's going to be inflationary pressure, that people will see that when there's an increase in demand, they'll put their hand out for salaries quite quickly and customers will get caught and builders will get caught if they haven't learned the lesson that they should have learned back in 2022, 2023.

Brad, there's lots of talk around averages of build costs going up by, you know, 50, 100%. Like, it's just banded about. But for you and, you know, are you doing light for light builds or is consumer preferences and, you know, style change dramatically? Like, how much have things gone up?

You know, a four-bedroom house or a square meter, right? Like... How much do you really think prices have gone up over the last three, four years?

Yeah, I can tell you. Like from, you know, like for like house from 2019 to 2025 would be about 50%. Okay. And a lot of that growth probably ended at the end of 2023. We haven't seen, we haven't really increased our retail prices really at all since the end of 2023.

It's been pretty constant because we can use our buying power in a sort of a quieter market to make sure that the cost increases that are out there, you know, we can sort of delay them or push them back against some of the larger suppliers.

But, you know, it would be 50% like for like. Now, like for like is not really relevant anymore because people can't afford those houses. So, you know, what people were looking for a four-bedroom, three-bathroom, double-storey, they're now looking for three-bedroom, two-bathroom, single-storey.

um you see a big decrease in contract values so not only not only has there been a reduction in the level of work but the actual size of the accommodation has significantly decreased because affordability is uh is key well that would be partly interest rates as well i would imagine yep definitely and it is quite an interesting hang on i did have a great con i had a great question then and then i

Flew out of my brain. At a comeback though, don't you worry about that. I'll take over.

So Brad, so obviously that 50%, what do you reckon that is, you know, for materials and what do you reckon it is just due to labour, like price of labour going up?

Yeah, you put it straight down the middle, Chris, 50-50. And, you know, there's a lot of stability in materials costs right now. You know, labour costs, particularly in Queensland, starting to grow again. because it really is a really optimistic and important market up there.

But the lack of competition and a lot of supply is the big problem. Just like we have with banks, just like we have with insurance companies, same in building materials, a lot of categories, there's two or three or sometimes even one supplier. And that's where Australia has found itself.

And there's, I think, a big proponent right now, spent a lot of time overseas last four months, to thank God for Donald Trump and his tariffs because there's a lot of factories over there that don't think of our market. We think pretty highly of ourselves as Australians.

I think we punch pretty big compared to, but when you go to a factory in Vietnam or China, they're not thinking of the Australian market. They're thinking about how they can fund or put products into Home Depot.

But there's an opportunity right now to try and get them to wake up to, you know, we still build 6,000 homes a year. There's still a fair bit of product to be delivered to try and break some of those duopolies that sort of sit in the market at the moment.

Well, I like that you're looking at the opportunities that Trump might be trading.

I was there two weeks ago, and when I go to China, you expect stereotypically to find a very labor-intensive, very sweatshop-ish type behavior. I've never seen that.

It's a highly evolved factories full of German, European equipment, Um, with very few people operating at great, great, you know, efficient capacities.

And, you know, a lot of them were operating at a third, um, simply because of the tariffs, because there's no point putting, um, stock in the warehouse if they're not quite sure whether or not it's going to sell or not.

So the opportunity is to start talking to, you know, those, um, those suppliers, which we are to say, well, hang on, read of it. Some of it here, it's okay, but there's no Home Depot. But we build 6,000 homes. Our Sumitomo Forestry family builds nearly 7,500 homes.

That's enough to get excited to find a new customer base. You might need five of those to make up some depot or maybe 10. But at least start looking to Australia. Don't be so reliant on the US.

You say this is one of the good solutions or the practical solutions, right? We've got a supply restraint in terms of how many builders here and they're all too busy and we don't need to build everything here.

We can start to get a lot of our builds done by China, you know, and our kitchens and our cabinetry and more and more of the home can be sort of brought into Australia rather than built here. Is that sort of what you're suggesting? Well,

I think the first thing is just, even if we just stay really boring and just say, can we get more new supply chains coming in to build traditionally? There's great opportunity there in terms of cost efficiency. Now, in terms of modular, like there's, so much conversation about modern methods of construction.

And, uh, the reality is, is that if it could be done and volume builders could make money out of it, then they would be already be doing it.

Um, no, it is very cost prohibitive, but it definitely provides great, um, you know, time efficiencies, but you know, we can build a single story home in 60 days. If you could probably stand up, you know, we are looking at modular in a box out of China.

We can probably stand it up in 40 days. Is 20 days worth an extra 10%, 15%? I'm not quite sure. So, you know, it is interesting.

You know, there's some great players trying to make a difference in this area, but it is, you know, I know of examples of certain large modular companies that are building for government and the cost is almost 70% more. than what it would be if it was being built in situ.

The reality is there's just no staff, people in those locations to build it. So that's great for regional Australia. But if it worked, I guarantee we would already be doing it. We're trying to, but it's really quite hard.

So where are the costs in that? Because, you know, it seems logical that it's like the Model T Ford thing. You know, it's an assembly line. It's controlled climate. You don't have to worry about rainy days and heat, hot days, et cetera. Where is the cost?

Is it purely in the transportation of the final products? It's so big and therefore it's so much more expensive.

I think the first part of it is geography. So you've got to have scale. So if you're going to build one of these facilities, you need to build it somewhere where you can get scale. Now, unfortunately in Australia, we don't have that high density of facilities.

of population like other countries won't have in Europe. So, if you're going to build a factory that can build these, where are you going to put it to service? You're going to have to have one in Melbourne, you're going to have to have one in Sydney, you're going to have one on Brisbane.

It becomes really cost prohibitive. So, it's not just the logistics, but it's also the fact that you don't have scale in any one location.

The second bit is it's just very intensive from a capital investment point of view. So, you know, a significant amount of investment has been made from a technology point of view, you know, bringing this equipment out to, you know, to make it work.

The third one, and I think the most important one, is the customer. Australia, auto housing is an Australian phenomenon.

Customers love to have their handprint on their home.

Real estate for us is like a religion. I don't think there's any mistaking of that.

Selling homes where people haven't had a chance to pick up their floorboards to design what they want their butler's pantry to look like, that is not what the market is.

And I think the market has to go through a correction and it needs to be re-educated because you're not going to get to great affordability and meet the crisis without doing it. But that is a big obstacle. They don't want to live...

You know, we've all been to Europe, we've all seen that type of product. You go to a builder in Sweden, there's two kitchens. It's blue or it's white. Which one do you want it to be? That's never going to fly for the Australian consumer right now.

Which is sort of, that feeds into part of the problem though, doesn't it? We're our own worst enemy. If we've got a housing problem and we really can't get enough of them up out of the ground fast enough, we've got to stop being so choosy.

Yeah, I think that, as I said, I think there is, the Australian consumer needs to go through a sort of a re-education about what housing could be.

It comes down to price though, doesn't it? I mean, like if basically if your option of getting to the market is,

was, I can't, it is the model T Ford analogy here, you know, used to be that every car was built by a little set of trades people and, you know, as a one-off each one, and then they managed to cut the cost down enormously, but give you one color.

So if it becomes that there is more accessibility for housing and But does it also mean that you've got, when you say the re-education, you've got to have a manufacturer or builder to produce the product to say, there you go, it is available.

You can have affordable housing for people to then say, okay, thank you very much. I'll take that. Or is it that no manufacturers game enough to take that risk?

Yeah, I think there's a huge risk in doing that because if you still have competitors out there delivering choice, then you may not get that customer. So in our business, we are pivoting pretty hard to what we call a complete home. You would call it turnkey.

um because you know the customer in in some regards younger customers in particular they don't they you know they they know there's an affordability proposition in that and they also want um immediate solution um whereas you know maybe five years ago people were willing to buy a block of land they still had cows on it and wait for the titling and then wait for your builder to build it and like

People want things faster now. So that's where the opportunity sits to say, you know, this is a conveyor belt, just like your Ford analogy. If you want to come off the conveyor belt, then there's a real cost consequence. And that may not be your first home.

Maybe it's your second or your third home or it's your forever home. But your first home to get onto that ladder, this is it. This is what it looks like.

I guess that's where off-the-plan apartments fit in, though, don't they, really, in a way? Yeah.

I know, but if you look at my LinkedIn, I spend all my time talking about apartments.

Capital growth, I think the worst thing we could do for our kids, and I'm not quite sure if any of you have kids, but I've got kids in their early teens and I think about it all the time.

I think the worst thing a kid can do is to buy an apartment thinking that's the start to get on the property ladder because you just don't get the capital growth. And I get it.

You'd think the guy that runs Australia's largest builder is going to say that, building houses, but that's the reality.

I mean, we can go a little bit longer. I've been later on the capital growth on, you know, even new versus old of houses and things like that.

But before we go there, for Metricon, what portion are you doing as house and land versus, say, infield sites or people owning, you know, knocking an old house down and putting a new one on? Like, how is it you split?

Yeah, I think we probably, you know, about 10, 15% of our business is that knockdown rebuild business. Okay, gotcha. And then the rest of it, you've got medium density, which is probably another 10 or 15%. And the rest of it is, you know, Greenfield or Brownfield sort of estates.

So, but, you know, and then in that Greenfield space, it's more about how much of it is what we call auto housing. Like we come in and choose everything from,

the type of hinge to the colors on the wall to come and, you know, we're going to have this house ready in two months' time. It is what it is. Please come and have a look at it and buy it. We're moving more.

We're trying to move our business more to that space because, you know, it's the way to challenge affordability because every time a customer touches a job, it costs money. It costs money.

Yeah. So if you're, um, I'm just thinking this through. So, I mean, the infield sites, um, they do make a lot of sense, right?

Um, because, you know, going to an architect, trying to get it designed, get it approved, you know, you haven't got the scale, like, but, uh, so what do you reckon, you know, like that, the person who sort of DIYs it and tries to, you know, get it all, their own designs and gets a builder versus just coming to you and design, getting one off the, off the, um, website, what's the savings for them over time?

Yeah, well, I think the first thing, mate, is if you go to one of those builders, you will not get a fixed price. You will get cost plus. And that's a pretty dangerous, like, you know, I'm an accountant by trade.

I couldn't sleep at night knowing that I'm paying cost plus in terms of arrangement because things could change quite quickly. So that alone, regardless about any other price differential, you know, I live in Bayside, Melbourne. There's a lot of great, you know, high-end builders in that space.

You know, is there a product in it for two hours? I don't think so. But it just comes with a premium attached to the fact that it's not a volume builder. Yeah.

But the fact that you could get a locked in fixed price contract with us with a beautiful design is very compelling compared to, you know, cost plus.

Well, let's face it, not every site, though, is suitable for a metric on home. You know, like where I live, I live in a conservation area. There's no way in a million years I was going to get a metric on home on my site when I did my big knockdown, well, mostly knockdown.

So, therefore, it's horses for courses in different areas are going to attract that or not. But I think that also, you know,

It's sort of interesting, and I do wonder, this idea of choice, you go into Homeworld and you go out there and look at all the different builders' products, and so it's sort of like it's encouraged amongst consumers that you're going to a volume builder and...

It's effectively, you're buying mass-produced houses because the designs are replicated, etc. But this idea that you're choosing one, and I know when you go into a new suburb and you see all the cookie-cutter houses, I mean, yes, there's a few different designs, but it is same, same, same, same, same.

So this concept of It's a bit like I grew up in the Shire, right, in Sydney. And in the Shire, one of the really common things, people like to call their kids a really common name, but they don't want it to be common, so they'll weed up the spelling.

It's a bit like that, right? So, you know, if my name's Kylie, K-Y-L-E-E, but, you know, it's really Kylie. Yeah. Do you know what I mean? That's what I always think of these. They're not really bespoke.

So why are people filling themselves? So the design may be pretty standard. They've picked from a group of 20, but they want the ensuite in a different location. They want the rumpus removed around. So they can do that. And they do that in it. You know, that takes time and it takes cost.

Yeah. And that's what adds on to the value of a home. So, you know, you've got to get drafted to redraw something.

Well, it adds to the cost of a home. It doesn't really add to the value.

Yeah, no, correct. Correct. I agree.

So just thinking, Brad, I think it's very interesting, this whole space, and they particularly have things change over time, right? So it sounds like the buyers are reducing what they want from a home, mainly because they probably can't

get access to lending enough to fund the four bedroom the two bath in the second td room right so they're they're saying look i've only got 700 to spend and what can i get and it's a three bed with a one bath etc so maybe that'll change when capacity goes up or you know and and rates go down etc and they've you know you've got a bit more they can spend but maybe not um

But it sounds like you're moving to more of this turnkey thing. So that potentially will give you more cost efficiencies that you might be able to pass on to buyers.

But if that then leads to a suburb, right, where, you know, in terms of streetscape, is it literally going to be something like a Jim Carrey TV show where it's all pretty much exactly the same? Or are you going to mix them up so at least it feels different?

And if they're not changed internally... Does that, when they sell one day, is it like, well, hang on a sec, there's five houses exactly the same, like my house for sale. Um, how do I make mine stand out?

Like, yeah, I think it's a good point. So there's a couple of things in that one. We work with great developers like Stockland. One of the big things that maybe a lot of your listeners don't realize is if you want to build a home, the developer approves the facade.

They want to have that difference in streetscape. So there's a great protection there because nobody wants what you're talking about. In terms of what you are talking about, if anyone's been to America, I don't know how people, when they get home, which house they decide. Which house to walk into.

You could walk into someone's wrong house because they all look exactly the same. They don't even have fences. But is that an evolution of where the Australian market needs to go to to solve this challenge? I hope that probably is the case.

Um, but so, you know, we, we mix these up, you know, where, you know, we, we, if we go into an estate, we would, we'd pick like, you know, a hundred over estate and pepper them, salt and pepper them as opposed to building them all in a row, just for the reasons you're talking about.

But, you know, there are other countries out there where, you know, they just start at the top of the street and you just go down. And the only thing that differs is probably the colors on the inside. This one's themed this color, this one's themed that color. Yeah. And that's the market.

Doesn't it come down to the individual purchaser though? They purchase their lot and then they choose whichever house they want plonked on that lot.

Here in Australia or over there? Yeah, here. Yeah, correct. That's right. And that's that whole bit that I'm talking about. They buy their land and then they want to go and get planning and then they'll pick a great design and then they'll customize it.

Whereas in other jurisdictions, other countries, it's like there's 25 of them here. And they've all been built at record pace. And we were able to get them really cheap, build them quite cheaply because we're able to use our buying power and trades like them because it's just repeat, repeat, repeat.

All those cost efficiencies, that's how you break the affordability crisis. But there's sacrifice, compromise. I'm on a personal mission to help more people make better property decisions.

You know, most people don't realise that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need.

And what I do is help people with tricky real estate problems, which often masquerade as simple questions like, should I sell my investment property because the interest repayments are hurting? Or should I buy before I sell? Or the other way around.

You can connect with me and access all of the tools that I've created to help you make better property decisions at veronicamorgan.com.au. And there you will find resources for first home buyers, details about my buyer's agent mentoring program.

You can connect with my Sydney based property management and buyer's agency teams, Australia wide vendor advocacy, or ask me for introduction to the small group of buyer's agents that I would personally recommend across the country. That's veronicamorgan.com.au.

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Yeah, because there's been some recent reports about the fact that Australian builders, the productivity has not improved in decades. Is this really at the core of the reason, the cause of that?

You know, I don't buy into that productivity piece. I said we build a single story home in 60 days. So not every builder is the same. You know, there are a lot of other smaller builders where I get it.

There is lack of productivity and, you know, some of it goes back to the equation about earnings. So trades don't work on weekends anymore because they don't need to. All those, there's a number of things that, you know, people want more work-life balance and what, you know, traders used to work, you know,

different areas to what they do now. There's a lot of things that have gone into that, but there definitely is a piece that if we want to build more affordable homes, there has to be a compromise, the Australian consumer.

If you're a first home buyer, you don't get to pick out what type of bench you have.

It's a journey before you get to that level of choice, or at least find a builder that can give you some choice, but it doesn't cost you in terms of that consequence.

Do you think there's also, we're making obviously compromises in what we're getting in terms of the size of the home, and maybe that's a good thing, right? Climate change, do we need homes that big? You know, heat them, cool them, et cetera, right? But the lot sizes are changing, right?

Like, I mean, you know, 10 years ago, 15 years ago, maybe it was a 400 and a 450, and now it's a 300, like... Is that the other compromise that we're having to face with? Maybe that's not a bad thing either.

I'm not saying these are bad things, but to keep prices at an affordable level, it's just the next evolution that Australians have got to get used to.

Yeah, correct. I think that townhouse living, you know, definitely in terms of first or second step on the property ladder is a real reality. I think that's a much better option than buying an apartment in terms of building capital growth. You will get capital growth in that asset.

But it's, you know, in some places that, you know, South Australia is only just starting to accept that, for example. in the last two years as a type of accommodation. So, again, it's educating the customer about what is the new solution for their housing needs.

Brad, a lot of people believe that capital growth comes from, you know, land prices going up. But, I mean, that's kind of been proven a little bit wrong in recent years because building prices have been going up and they can go up a lot, 50% in five years.

If building prices don't go up, right, because, you know, over the next, say, five years or they go up at a much slower rate, like, how do you sort of think about, you know, when you're buying, you know, at least, you know, let's say, what do you reckon about it?

50% of your purchase price goes into a build? I don't know, like... Yeah, it'd be about right in terms of build compared to land, yep. So, you know, when you're buying, you're getting a 50% LVR, okay, land to asset ratio, right?

How do you think that that really affects your capital growth, say, versus maybe buying more in an older house on a bigger block where you're getting more of your cash into land?

Yeah, I still believe that land is the thing that's limited and that's where the capital growth sits and that's why you don't get an apartment because you don't have any land. You've got a bit of space in the sky. So I'm a big believer in that.

So I don't think there's any sort of – compared to a small or large lot, it's going to change. But I think – it's the square meterage of the land that you have with a good quality home that can stand the test of time is how you get capital growth.

And I think what we've seen, you know, every time there's been a hundred basis point correction in interest rates over the next five years, you should see something like 15, 17% increase in property prices, which, you know, it's hard to fathom relative to where prices are right now, but that's the reality that seems to have played itself out time and time again in this market.

So, I mean, I think obviously there's a huge issue, societal issue with housing affordability, right? And so, and developers and builders have, you know, in the past take a lot of hate, right? The problems, et cetera. But, you know, as a consumer, right, you're still buying a product, right?

But you're going to sell one day. What are the ways they can protect themselves? Because there are risks involved with buying, not just from a builder point of view, but even just from a resale value point of view, different estates, different lot sizes, different parts of the lot, different parts of the estate.

So how can a buyer play that? If they want to play in this space, particularly in the house and land space, how do they protect themselves? Because ultimately, it's not their forever home sometimes, and they do want to sell, and that capital growth is important, which is kind of what you highlighted earlier.

Yeah, I think, Chris, the majority of people buy a house thinking they're going to sell it. I believe that. It's not when you get to the end of that, you start to think of your forever home. That's not something you think about when you go into it.

I think the most important thing is you've got to focus on brands.

So picking a developer that's standing behind its brand in terms of that, one, they've picked an asset that's going to deliver capital growth because if they deliver an estate that turns into a slum, that's not going to carry itself forward into a success.

in the future, and also that they're going to look after that estate as long as they can before they let go of it.

So which brand are you talking about here? Are you talking about a developer's brand?

Yeah, like a stock loan sort of thing. First we develop a brand. But they've actually done the due diligence, not over, well, this is a feasibility that gets me in and out really quickly and I make a good return. It's one that they're going to live by for a period of time.

And then the same thing goes for the builder. So, if you can use a builder that doesn't have a brand, of course, you can expect me to say that, right? Of course.

But you want to make sure that you've got something that you live and die by the quality of the product that you deliver. If you don't have a good quality product, it won't… get you good resale value in the future. It has to stand.

It doesn't matter how good that block of land is. If the property doesn't have something that is able to be well maintained, is in good quality in five, 10 years time, you're not going to get that capital gain. If you've got a brand, a builder that's brand, we will come back.

You can be sure we'll come back because if we don't, we're not going to sell any more homes.

Well, that is a very valid point that the builder's likelihood to come back. I mean, literally, I had my rebuild done just over five years ago and I've got a leak and my builders are back. You know, they're sorting it out.

But I know a lot of people where they can't find their builder and or if the builder's gone bust. I guess that's another thing too, which brings us sort of back to where we started in a way because I'm curious as well.

Has every home sort of owner or home purchaser who was midway through a build and got caught up in that sort of avalanche of builders going broke, has everyone had their build finished yet or are there still people in limbo?

Yeah, I think, I know the ones we did for Porter Davis, they're all done. I'm sure there are probably some out there where they haven't, you know, has been a great, still haven't got a solution.

Wow. It's, you know, it'd be pretty terrifying. Horrible. And I think that's the other bit about people. At the moment, people want surety on their financial confidence and they also want surety on the building journey.

You know, how can you buy a block of land and you've got a rental or a mortgage somewhere else and you budgeted that's going to take 18 months but it took two years. You know, that's a big piece that's really quite important.

But going back to why these things happen, Veronica, is that a lot of builders are really thinly capitalized. Like there's not much substance behind them. These are… Models of subcontractor where you get the money for the customer, pay the subcontractor, maybe you've got a bit of time, you play the cash in between.

Builders need to have financial substance. You're putting the biggest acquisition you've got in someone's hands. If they don't have a strong balance sheet, that's really quite terrifying. And that's a problem.

I'm keen to know how can a consumer do their homework on that builder, but also how much responsibility should sit with regulators or lenders to ensure that builders are financially viable?

New South Wales has a great tool called iCert. I don't know if you've come across that. Yeah, that's a tool that's done by Equifax. You know, a builder has to pass tests in terms of financial competency, capacity, you know, to do what they say they're going to do.

And we're proud to say we've got that certification. They're really important to give customers that confidence. And it goes to that importance of brand. And regulators have a massive responsibility to make sure that there's robustness in the market. It goes back to Christian's comment before.

We definitely need that, but we definitely need builders at the same period of time. So, you know, there's a fine line there that needs to be worn.

But that, you know, I think more stuff like iCert gives the customer confidence as someone independent, as verified, that, you know, this business can be trusted to get the job done.

Yeah, we've had a very interesting chat from us. What's his name, Veronica?

Mental Blank.

Yeah, Mental Blank as well.

I feel like his name was Brad as well.

Yeah, best communicator I've had. One of the best on the podcast, to be honest. It was a good live. But, I mean, what percentage of yours is actually selling to investors, Brad?

Yeah, investors are just starting to come back to the market. You know, in Queensland, next to nothing. In Victoria, it's starting to emerge again. Quite a difficult environment here for an investor to sort of take the leap. Now, the yields after all the property taxes are paid are not that significant.

So, you know, we would normally say, you know, somewhere around 20%, but it's actually much lower than that right now. And that's the bit that needs to change. And, you know, I've spent some time talking to the housing minister about

We spend a lot of time talking about social affordable housing, and that's the lever that they've really got in charge of. But you really need the private enterprise.

You need mom and dads to come back to the market, to build a dual occupancy home, to live in one and sell another, or to really start to get...

more parked out there, but the investors are still very much sitting on the sidelines. We know it's our favorite category of investment, but at the moment, the fundamentals don't always stack up, particularly here in Victoria.

Is there, you know, just in the industry, I mean, in the house and land package, sort of, there is a bit of spruiking, I guess, builders and developers sort of paying people to sell products, right?

You know, how does that sit with you guys when, you know, it's building for investors, it's not building for owner-occupiers, and what are some of the dangers where people go wrong buying these, you know, for investment?

Yeah, I think we have our own business called Invest by Metricon. So we bring customers in, we explain to them, take them through the depreciation schedule and how their tax is going to work and help them understand. That's our preference so that they're a first-time investor, they understand the pitfalls of

you know, of what can go right, what may not go right in terms of building a home. There are a lot of other players out there, a lot of other channels, you know, selling to investors and, you know, very large undisclosed commissions. That's not something that we really like.

Because we like to have a relationship with a customer. Sometimes when you're in that investment space, you don't really have a relationship with the customer. You have a relationship with a financial broker and that's not one that really fits our brand.

Yeah, I can see how it could be quite damaging for the industry. Like if... So-and-so is basically producing investor stock. And this is like you say, when you mentioned around apartments, right? Investor stock's been proliferated in the Melbourne market. And so it brings mistrust into the whole apartment market.

And the good builders building high quality, you know, great builds get brought down by them. I can imagine there's a bit of a problem in the house and land and the new townhouses where all of a sudden, you know, they're getting washed up. And you say, well, the house is better than that.

And that's, you know, but it's dragging you down a bit. Does that happen?

Yeah. No, that's right. But there are some good players in that space as well. There's some which we do business with, but as I said, having a relationship with the customer, making sure we understand what we're about, what they want, that's the most important thing for us.

A lot of those, you know, I know a lot of investors try to buy those dual key properties. I'm not a fan. I'll put it out there.

I would say, and, you know, I've done a little bit of analysis over the years, ad hoc analysis, case by case, where some people have bought these newer properties, have made good gains, capital gains, and others haven't.

have lost money, you know, and it seems to me a lot of it is, is really location specific.

If you're going to buy in an area where there's a lot of the same sort of stock and then there's ongoing, uh, subdivisions, then you, you're really not going to make much growth for a long, long time.

Um, whereas if you're buying, particularly in the, in the infill sites, then there's potential often because there is pent up demand in those, in those suburbs. So it is very much location specific, right?

Correct. You know, like, you know, we, school zones, you know, those type of products really work great in school zones because people want to live in that particular school zone and they can get their kid into that area by living in a dual occupancy home.

It's a, you know, really great fun, you know, piece. We see the dual occupancy piece really about, you know, Planning for life.

So, a lot of our customers, they'll buy a house, they'll look to do a duocracy home to live in and one to invest to give to the kids at some point in the future or, you know, it's really a lot of, you know,

generational planning we see in a lot of these dual occupancy homes. But dual lock at the moment is really a dead market because the fundamentals just don't work up. The interest rates are too high. The land prices that they had bought them at maybe two years ago are too high.

They're not making the money that they can.

I think dual occupancy, I think, is a big opportunity to solve for the housing crisis.

I live in a suburb that was really built in the 50s. There's a lot of people in there that are in their 70s and 80s and in their homes by themselves.

It's great opportunity for them to, you know, rather than waiting for themselves to pass away and their kids to come and pick over the inheritance, sell their home, move to another great, you know, lifestyle asset where they can have a good end of life.

And, you know, we can create some density, what we call gentle density that's not impacting the, you know, the streetscape too much because no one wants to live in a street where there's every house is a townhouse or a dual lock. But, you know, you do that.

2,000 times, you know, that's a solution rather than building four 20-story apartment house out in the suburbs.

I mean, maybe there's a, you know, room for all, you know, apartments and, you know, townhouses and greenfields and maybe it's a bit of all solutions sort of to help fix the problem. I mean, what's your thoughts on HIA? You know, they've done a lot of reports on the cost of housing

is a lot because the government likes to take a big uh drink and you know 40 50 of the cost of the house comes in taxes and governments are in a lot of debt and need more taxes right um particularly where you are in melbourne so um do you reckon that's a bit of a fur feed do you reckon it's actually true you know does the government need to start taking a bit of a haircut to to play its role here and and actually make it a bit easier for you to actually be able to um you know produce more affordable housing

Yeah. And it definitely is true, but it's in time, not so much in dollars, if you know what I mean. So, you know, I was at a site just yesterday, beautiful 40 square home, double story. We built it in 110 days. It was in planning for two and a half years.

So, imagine the cost. So, that's not necessarily taxes. Sure, there would have been council rates. There would have been potentially land tax to be paid during that period of time.

But it was all the costs associated with the delay caused by the regulation that is going into that number that HIA has put together. So, someone sat on a mortgage for that land and probably paying rent somewhere for two and a half years just for some-

you know, bureaucracy council, who I'm sure are doing it from what they think is the, you know, the betterment of the community and the protection of the assets of the people in the street. But two and a half years to get a planning approval is just, it's absurd. It's just crazy.

And, you know, the federal government, I feel, you know, I've been critical sometimes in the past, but I think they're almost like, hiding to nothing. They actually don't have the levers. They're not in charge of the levers to make a difference.

The lever is some guy called Dave sitting at the Bayside City Council down here in the suburb where I live. And it's really hard to reach in and make those changes without there being You know, people that are upset.

But that's what's necessary. It really is necessary. Like, you know, I live this world where I try to be yimby as much as I can because we need to find a solution. But I also understand when people on my street get upset when there's a big house going in that no one likes.

It's a really difficult sort of juggling act.

I mean, it counts, you know, nimbyism's pretty rife, right? Especially in Bayside, I'd imagine. Trying to protect their biggest asset, right? And everyone's complaining about everything. But in the house of lands, are you still finding it's a big issue for you guys?

Like, in terms of getting, you know, a farmland cut up and reduced into an estate and then all the facilities and, you know, getting that approval and...

Yep. One, release of land is a problem. Two, we've got these stupid additional taxes down here, windfall gains taxes, stopping farmers from actually selling land here in Victoria. The civil contractors, they're back there in the tunnels. They're not busy.

They are too busy to help out. So they're definitely in delays. They're just getting a title, Chris. Yeah. You know, where you guys are in Sydney, like it varies so differently from suburb to suburb. Like the Shire might be fine. You know, I could mention a couple that are really, really bad.

Like, you know, I'm talking about like 10 times slower.

And, you know, I feel like the councils are, like, you know, I think the New South Wales governor up there has done a great job trying to, you know, mandate how quickly council Sydney to respond in New South Wales.

But what we saw in New South Wales was a lot of the council saying, well, I now need to respond within 30 days. So the answer is no.

Yeah.

And it's like, no one like, well, I always talk about my team about we're all on a tug of war. Like we're all trying to pull it across the line.

And sometimes I think there are just far too many people that you wouldn't actually expect that are on the other end of the, of the rope.

And that is definitely the case when it comes to local governments.

But again, it's all because they think they're doing what they think is the right thing, what their constituents want to protect. Well, you said, Chris, it's their largest asset. Nobody wants to have their house overlooked. I get it. I fully understand it.

Just think about this. I wouldn't mind killing some myths, I guess. What do you think about people like Stockland? Let's remove Stockland.

Let's just say big landholders and big developers who have got and bought these farms, they're buying it usually sometimes years and years ahead of time because that's how you get it, the cheapest price.

The farmer that's right with the back door of this house and land packages isn't going to be selling it for a cheap price. They know it's going to get rezoned soon.

you know but you know if you release a lot of land at once it's just economics 101 right you're going to over flood the market and buyers are going to have choice so isn't also the developers that are releasing it slower to to maximize the the value they get per lot like um or do you think that they're not really to blame that they actually just want to turn over money as fast as they can and it's the governments that are slowing it down yeah i think i

First thing is a lot of those big developers, when they buy those farms, most of them are in partnership with those farmers. It's not often that they're just buying it outright and that the farmer isn't on the way for the journey.

So there generally is more alignment there than what you probably think there is. And the other part is they have the same sensitivity. They have sensitivities that are different, but they need to complete with. They've got shareholders they need to deliver upon.

They've brought them on a feasibility that needs to be delivered and You know, unfortunately, they're in business. They're not a, you know, a social enterprise.

And so, we should expect, just like everybody, that, you know, we've got a crisis, but at the same time, we're trying to make as much money as it can be made while also delivering a great product to the customer.

And you've got one shot at it, don't you? I mean, that brock of land gets built on once and maybe again in 50 years' time. Yeah.

Yep, correct. And that's why you see a lot of developers have started to realize that God's not making more land. And so what are the other ways in which they can actually be, rather than selling it, how can they find other ways to deploy it into the market?

I'm a big believer in the LLC product. If you think of all the age people that are living in shit homes-

you know, across suburban Sydney, Melbourne, Brisbane, that could be living in a great lifestyle, in a lifestyle community, free up that stock, build a dual-occupied home or whatever, you know, I think that's the big solution to the housing crisis. And Chris is right. Apartments can fit in there somewhere.

Somebody's got to go knocking on a lot of doors to get those old people to buy into this as an idea. Right.

We always do a property dumbo at the end. It's just a story, a tale. We try to lighten it up at the end, just a bit of fun. Have you got one for us?

Yeah, I think I sit here, the customer car park is just behind me and I see the staff coming in, sorry, customers coming in to do their selection. Sometimes they're in there for two days and

I just like to say to the husband and wife combinations or the partner combinations come in, just be easy on one another because I see them like they have a – out in the car park, I see them having a bit of a pep talk, talking about what the budget is and that everyone's on the same page.

You see them sort of giving themselves – they're all on the same page. And then at the end of the day, I see them leaving very – with a lot of gap between the partners. Generally, it's the female that's first and the husband behind, but not always.

Just make sure you have a good plan and try and stick to it because sometimes people put themselves under a fair bit of pressure.

Maybe your consultants need a little bit more of property therapy, as we call it in our business. They need to get coaching skills.

Yeah, that's exactly right. That's probably how you measure the success of your organization though, right? Like the bigger the gap is, the more unhappy they are. And that means these sales guys have pushed the budget up.

Well, someone's happy though, Chris. One of those people, one of those customers were happy. So whoever, normally the one that's at the front. Yeah.

You have a good plan and stick to it. So, I'll go to an auction on the weekend and I'm like, every time I sort of have a few moments myself, I'm saying the number in my mind that I'm limiting myself to. Just visualize it and stick to it.

Right. I wrote a book on auctions, right? Yep. We won't have time to read it.

I'll probably give me the, I have to get chat to each PT. Stop this.

Yeah, getauctionready.com.au. What I would say, one little piece of advice I would give to you, it's great to have your limit, right? And you may have done this, but most people don't set their stretch limit. They set their what they want to pay limit.

And then that goes out of the window in the middle of the auction. You give the game away. You give it away to everybody on the floor if they're paying attention because that's the thing that most people haven't thought about. But what if it goes a bit over that limit?

will I bid or not? And they show, it's hilarious. I watch people who are really good at bidding. They're great. They're really convincing and they scare everybody until they get to that point and they go, oh.

Yeah, yeah, yeah. I had this really weird one. The last property I bought, the people I was bidding against me were standing next to me, and they were hiding their mouth so the auctioneer couldn't hear what they were saying, but they were actually doing that.

They were actually telling me exactly what their strategy was. I wanted to go up to them afterwards. It was like, you're not bidding against him. You're bidding against me. I felt really bad.

Anyway, we'll see how we go.

It's a very good point, though. Good luck with it.

A double dumbo there for us, Brad. Thanks so much for the chat. We haven't had many builders on here, in fairness, over the years, and you do play an important role, part of the overall system, and it was good to unpack it a bit more. So thanks for coming on.

Thanks, mate. Anytime.

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