Australia has a housing supply crisis and a builder working capital crisis. They turn out to be a similar  problem.

A builder we know had the best year of his life last year. Four homes finished, every job profitable, an order book stretching into next winter. In October he could not make payroll.

Nothing had gone wrong. No client refused to pay. No job blew its budget. He was simply doing more work than his bank balance could carry, and the money he had earned was sitting in half built houses instead of his account.

That is not a downturn story. It is the opposite. The work is there, the demand is not going anywhere, and that is exactly what makes it dangerous.

Three shortages are stacking up in Australian construction right now. Homes, tradespeople, and the capital to build with. Only one of them is fixable from your side of the desk.

The housing shortage is real, and it is not easing

Start with the demand side, because it is the part nobody disputes.

Australia’s population reached 27.8 million at the end of December 2025. It grew by 412,500 people over that year, a rise of 1.5 per cent, with net overseas migration contributing 301,000 of them. Every one of those people needs somewhere to live.

Supply has responded, up to a point. Dwelling approvals reached 17,019 in May 2026, up 5.3 per cent on the year before. House approvals hit their highest level since September 2021, the fourth month running above 10,000. On paper, the pipeline looks healthy.

But the problem sits between approval and handover. Over the past year approvals rose 9 per cent while completions actually fell 2 per cent. We are approving more homes and finishing fewer of them.

The National Housing Supply and Affordability Council now expects around 980,000 homes across the National Housing Accord period, against a target of 1.2 million. The target date has slipped from June 2029 to September 2030, and given past performance, even that is likely to be a bit on the optimistic side!:

Public infrastructure sits on top of all this and competes for the same trades. Infrastructure Australia puts the five year public pipeline at $242 billion, up 14 per cent, with $51 billion of it in Queensland. Demand on the Sunshine Coast and in Wide Bay over the next four years runs at more than four times the previous four. Roughly 41 per cent of infrastructure construction gets subcontracted, which means over $100 billion of that pipeline lands with firms below the head contractor.

If you build houses on the Gold Coast, you are competing for concreters and chippies with a civil pipeline that pays well and pays reliably.

The bottleneck has moved from approvals to delivery

For years the industry blamed planning. Councils, rezoning, assessment times. Those problems have not vanished, but they are no longer solely what is holding the numbers back.

Two constraints matter now. The first is people. Workforce shortages across construction are projected to reach 300,000 by mid 2027, and no single business fixes that. (Ref: https://www.infrastructureaustralia.gov.au/reports/2025-infrastructure-market-capacity-report)

The second is money. Not profit, and not pricing. Working capital, which is the cash you need in the bank to carry a job from slab to handover.

That second one is a business problem rather than an industry problem. It is the one that closes companies, and it is the one your accountant can actually do something about. So that is where we will spend the rest of this article.

What one $500,000 build does to a builder’s bank account

Take a single job. A $500,000 domestic contract, 25 weeks, on the standard QBCC stage schedule.

You take a deposit at the start. Queensland law caps it at 5 per cent for a level 2 contract, so $25,000. That money is gone inside the first week of site works.

From there the pattern repeats. You fund a stage, you claim it, the payment pulls you back toward the line, and then the next stage drags you under again. Base, frame, enclosed, fixing, final.

The deepest point comes at week 17. That is three quarters of the way through, when the house looks nearly finished and the job feels safe. It is not. You have just funded the entire enclosed stage, the roof, the windows, the brickwork, the most material heavy phase of the build, and you have not claimed a dollar of it yet.

The chart shows two lines for a reason. The dashed one is the job on its own, which finishes at $100,000. The solid one is what actually happens to your bank account, because your overheads keep running whether you are claiming or not. Office, insurance, vehicles, software, admin wages and your own wage cost roughly $3,000 every week of that build.

Follow the solid line and the job resolves at $25,000, not $100,000. The gap between those two numbers is the single most misread figure in residential building.

Three things that make it worse than it looks

GST falls due on the claim, not the payment. If you account on an accrual basis, you owe GST on a progress claim from the moment you issue it, even though the money lands weeks later. Worth saying plainly: GST is not an expense. You collect it and remit it, net of credits. It never touches your profit. It absolutely wrecks your timing.

PAYG instalments are calculated off last year. A step change year means your instalments lag reality, then a balancing bill arrives to catch up. Varying them is allowed. Doing it deliberately, rather than discovering the problem in October, is the difference.

Payday super has changed the payroll cycle. Superannuation now moves with each pay run rather than sitting in your account as quarterly working capital. For a business running crews, that is a real and permanent reduction in available cash.

So what does a builder actually earn?

Most builders read the chart above and react the same way. Twenty five thousand dollars? For six months of work?

That reaction comes from a definition problem, and it is worth clearing up because the industry uses the word “margin” for three completely different numbers.

Gross margin is what is left after the direct costs of the job, as a percentage. Materials, labour, subcontractors. On our $500,000 build that is $100,000, or 20 per cent. This is the number quoted in tenders and the one most builders mean when they say they are on 20 per cent.

Net profit is what the business keeps after overheads. On that same job, about $25,000, or 5 per cent of the contract. That figure is consistent with what the industry itself publishes. Master Builders WA puts typical overheads at around 18 per cent of sales revenue, leaving net profit before tax in the range of 3 to 7 per cent on gross margins of 16 to 22 per cent. (Note this does NOT mean, that well-run building comapnies can operate on significantly higher nett profit margins, which is quite possible, even to the extent of between 10-15%.)

PEBITDA is the number that answers your actual question. Proprietor’s earnings before interest, tax, depreciation and amortisation, which importantly (as a builder) adds your own wage back in. Net profit sits on top of the owner’s wage, never instead of it. How you split your return between wages and distributions is a tax planning decision, and it does not change PEBITDA by a cent.

Look at the bottom panel of that chart, because it changes how you should think about volume. Overheads barely move as you add jobs. Your office, your insurance and your admin are already paid for. So the third home a year produces about $155,000 of PEBITDA, the fourth about $255,000, and the fifth about $340,000.

Each additional house adds roughly $100,000 of proprietor’s earnings while adding almost no overhead. The fourth home is the most profitable house you will build all year.

Now multiply it by four

However, here is where the two crises meet.

To build four homes a year you do not build them one after another. You stagger them, three or four running at once, each at a different stage. Every one of those jobs carries its own funding gap, and the gaps overlap.

The peak capital requirement hits $238,000 at week 16, and that is before a single house has completed. Maximum exposure, nothing handed over, nothing to show a lender. The business runs cash negative for 39 of those 52 weeks. Every individual job is profitable. But the business is underwater three weeks in every four.

Read that against the PEBITDA figure and the trade is stark. You have to fund roughly $238,000 of working capital to generate roughly $255,000 of proprietor’s earnings. That is the building business.

Three failure modes show up in the shape of that line, and we see all three in practice.

The first completion feels like rescue, and it is not. When house one hands over, the balance jumps. It looks like the hard part is done. But two more builds are mid-stage, and that money is already committed to their next material orders. Builders who treat that jump as profit are the ones who ring us in February with a problem!

Scaling deepens the trough before it lifts the return. Add a fifth house and your peak funding requirement grows immediately, while the extra earnings arrive months later. That is textbook overtrading, and it explains something that confuses people outside the industry. Builders fail in booms more often than in downturns, because a downturn does not tempt you to take on a fourth or fifth job.

Then there is the timing problem that catches the most people.

Your profit is assessable in the year you earn it, but the cash arrives at the back end of each build. If you scale up in year two, the tax bill from year one plus your PAYG instalments land somewhere around week 16 of the new cycle. That is the deepest point of the trough, on the biggest year you have ever had, with three jobs mid build and nothing yet handed over. Nothing about that is fixable in December. It has to be planned in the July before.

What to put in place before you take the next job

None of this argues against growth. The demand is real and it runs well past 2029. It argues for building the financial machinery before you scale into it.

• Run a 13 week rolling cash flow forecast. Not a profit and loss. A P&L told our builder he was doing fine right up until the week he could not pay his crew.
• Claim on time, every time. A late progress claim is a self inflicted funding gap. If your claims run a week behind your stages, you are lending your client money at zero interest.
• Get variations approved in writing before the work starts. Verbal variations are the most common way a profitable job turns into an argument.
• Take the deposit promptly and in full. It is capped at 5 per cent on a level 2 contract, so there is no room to give any of it away.
• Vary PAYG instalments deliberately. Do it as a decision, with numbers, not as a reaction.
• Arrange finance before you win the work. A suitable finance facility negotiated in week 16, with three jobs open and nothing complete, will cost you far more than one arranged in a quiet month.
• Diarise the defects liability period. In Queensland, the party holding retention after practical completion must give notice within 10 business days before the defects liability period ends. That notice is your cue to serve the final claim. Money gets left behind simply because nobody put a date in a calendar.
• Know your own wage. If your wage is zero and you are calling the shortfall profit, you are funding your margin personally. It stays hidden until you try to sell the business or step off the tools.

The work is coming either way

The shortfall compounds every year. The Accord target is running fifteen months late, the public pipeline runs past 2029, and Queensland demand keeps climbing toward 2032. Nobody in this industry needs to worry about finding work.

The builders who capture it will not be the ones with the best order book. They will be the ones who can fund it.

If you are looking at a bigger year than last year, talk to us before you sign the next contract rather than after. We work with builders and trade businesses across the Gold Coast on exactly this, forecasting the cash rather than just reporting the profit.

Contact us here to discuss your situation.

Disclaimer: This article provides general information only and should not be treated as legal or financial advice. Graphs and examples are illustrative only.