Article by latest.insure
So, here’s how the housing shortage could impact your SME
Finding and retaining talent
If current and prospective employees struggle to find affordable housing within commuting distance of your premises, they may seek opportunities elsewhere. This can create hurdles in recruitment and staff retention
Rising business rental costs
As the cost of living increases, so will rental prices for your business premises, potentially adding to your business expenses
Employee stress and productivity
The search for a home can be stressful, impacting morale and productivity. The State of the Nation’s Housing 2022-23 report estimates 377,600 households are in housing need, spending over 10 hours a week worrying about housing stability. Expect that to hit productivity and discretionary income
Slowdown in the property industry and potential recession
A slowdown in the property sector could ripple through associated sectors such as financial services, potentially tipping the economy into recession, particularly if business confidence shrinks.
To help counteract potentially negative effects to your business, consider what’s in your control – try these tips. Offer relocation assistance if you’re hiring people from outside your area. Hand staff more flexibility, such as hybrid or remote work arrangements. Ensure your salary and benefits package remains competitive, despite the tough housing market.
Labour shortage: A key factor
A lack of sufficient skilled construction workers is a major contributor to the housing shortage and hinders plans to build more homes. Inflation further complicates the issue by driving up the cost of building materials.
The National Housing Supply and Affordability Council emphasises the need for:
- Planning reform
- A more productive residential construction sector
- More vacant lots released for building
- Removal of barriers to institutional investment in housing
Impact on property values
Property market analyst Michael Yardney forecasts that the housing shortage may last for several years, significantly impacting house prices and rental markets.
For SMEs already holding property assets, the housing shortage translates into a potential windfall as property values are expected to soar. This can improve your financial stability and lending power.
However, if you don’t hold property or are looking to expand your existing holdings, the extra competition and inflated prices can present significant hurdles.
Meanwhile, if your SME owns commercial property, the housing market still offers opportunities. With limited housing availability, well-maintained commercial spaces may become even more desirable for businesses seeking office space.
As well, rising property values put pressure on rental markets, increasing the burden for those who need to lease. If you’re already leasing, higher rents can add to your operating budget and profitability. It depends on your location, too. Atlas Economics says commercial rents in Sydney are up to 80% above those of equivalent sites in Melbourne and south-east Queensland.
Do I need to increase my insurance?
Whatever your situation, it’s crucial to ensure your property insurance – building, contents and/or landlord – reflects the replacement value, including costs for compliance with current building codes.
Regularly review your insurance policy so your coverage reflects the current value of your assets. Otherwise, you’re risking over insurance or under insurance.
We can help assess your risks, recommend mitigation measures and ensure you have the right commercial property insurance policy in place.
Best practice is to keep your policy updated.
