In Australia, property development faces a parallel tension, a different kind of resource strain. Many projects simply “don’t stack up” as construction, labour, and finance costs continue to climb. Western Australia’s property market is at an inflection point, grappling with housing supply pressures, development feasibility challenges, and shifts in financing.
Development Feasibility: When Projects Don’t Stack Up
Property development in the current climate presents a harsh reality: many projects simply “don’t stack up” on a feasibility basis. As construction and finance costs have soared, the numbers often fail to turn profit, leading to delays or cancellations of developments.
For senior leaders in property, the emphasis now is on strategic project selection and risk management. Development Directors and Managing Directors are increasingly choosy about which projects to green light. Focusing on those with resilient financials (e.g. in prime locations or with secured funding) and shelving marginal ones. Creative approaches like design-and-construct partnerships, modular building techniques, or capital stack innovation are on the table to improve feasibility. It’s also an environment where patience and timing matter: some firms are land banking or waiting for construction cost relief, while others push projects now to meet demand, hoping to ride out the cost curve.
There’s no easy answer, but one thing is clear: feasibility analysis has become the critical frontier for decision-making. C-suite executives must foster teams that excel in financial modelling, risk analysis, and agile planning to navigate this challenging period.
Developers are looking for candidates who demonstrate full 360-degree capability. Professionals who combine commercial and technical acumen with the credibility of real, delivered project experience. Those who’ve successfully navigated complex approvals, finance negotiations, and construction delivery are now the most valuable operators in the market. These candidates capable of turning challenging feasibilities into viable, value generating outcomes.
Why are so many projects struggling to remain viable? Several factors are at play:
- Skyrocketing Construction Costs: Building expenses have spiked dramatically, up 20%, 30%, even 40% in recent years for some projects. Such inflation in materials and labor can erase developer profit margins. Executives now must tighten cost control and consider innovative construction methods or value engineering to make projects feasible.
- Labour Shortages & Builder Insolvencies: There simply aren’t enough skilled trades and contractors available, which drives bids (and costs) higher and causes schedule delays. Over 3,000 construction companies in Australia went bust in FY2024 alone amid these pressures. Directors need contingency plans for contractor instability and to foster strong relationships with reliable builders. For groups like Blackburne, projects like City beach and Karringyup can only begin once a builder is elected. Does Blackburne board the Multiplex train again or do they try and find a Tier 2 builder capable of a build of that statue.
- Expensive Financing: The era of cheap money is over. Interest rates in Australia hit their highest level in over a decade in late 2023, drastically increasing the cost of development loans. Higher debt servicing costs mean projects require either greater presales or higher end prices to be viable. This is a tall order in an affordability-constrained market. CFOs and development chiefs must now structure deals with prudent leverage and perhaps seek alternative funding to get projects across the line. The mass entrants of PE and non bank lending has saturated the market, whilst more expensive, Pre sale commitments are far less and with so many players of non bank lending, lending houses are racing to the bottom and going above and beyond to make a deal work.
- Strict Pre-Sale Requirements: Traditional banks have tightened development lending criteria, often requiring 70–80% of units to be pre-sold before funding a construction loan. Achieving such pre-sale targets can be difficult, slowing the start of projects. This dynamic has put pressure on marketing and sales teams (and in turn, on project directors)
The combined effect of these factors is a wave of “diminishing feasibility.” Industry reports note that many developers simply can’t make projects stack up financially, so they don’t go ahead. When new housing projects stall, it becomes a vicious cycle: future supply shrinks further, competition for existing assets increases, and affordability worsens.
The Leadership Imperative
For senior executives, this environment demands a new blend of expertise:
- Financial acumen to make feasibility models work under tight margins.
- Strategic foresight to anticipate technological and energy-market shifts.
- Operational agility to deliver projects that align with evolving ESG and digital infrastructure requirements.