Home ownership is extremely high in Australia when compared to other countries. This has led to a very strong building industry, employing a substantial proportion of the workforce.
Work in the commercial building industry is mostly undertaken by large companies and many of the smaller businesses involved in the commercial building industry sector only work at the lower end (i.e. factory units, small suburban offices and shops etc).
Some of the businesses involved in the building industry are businesses involved in electrical work, plumbing, painting, building, plastering, carpentry, bricklaying and grano/tiling.
Businesses within the building industry tend to specialize in one of the three following sectors:
New homes - businesses in the building industry that operate either as the builder of the homes or work during the construction of new homes.
Renovations - many homeowners have gone into doing major renovations (i.e. add extra rooms etc) rather than sell and build or buy another home. This particularly applies to owners who like where they are living and consider the costs of selling (i.e. commission, stamp duty etc).
Repairers - businesses in the business industry involved in doing small jobs (e.g. blocked drains, paint a few rooms etc). Most of these businesses don’t have the capacity or knowledge to handle the larger renovation work. Also the cashflow is quite good in this sector as the homeowner pays straight away.
Due to the cyclic nature of the building industry, low margins (except repairers) and ease of entry, values of businesses in the building industry are low when compared to other industries. Many tradesmen, who may want to buy a business in the building industry do not have the financial resources or don’t see the value in paying too much goodwill. They would rather set up from scratch than pay a lot of goodwill.
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