CONSTRUCTION ON NEW HOMES SLOW, SUPPLY TO DEMAND, MAIN CAUSE

Building a home is the great Australian dream, or at least it was until there was a severe shortage in supplies pushing building families to cover mortgage and rent for longer than expected. However, they are not the only people that are feeling the struggle, builders are not only changing the strategy on how they quote builds but also how they operate. In 2021 there was a record workbook of 143,700 detached homes commencing construction across the country.

The Builders Struggles and Concerns

Across the country builders are reporting issues in accessing items like timber for house frames, melamine for kitchen designs just to name a few. This is happening for a few reasons. Firstly, there was a huge construction boom with the HomeBuilder scheme was released offering owners grants worth tens of thousands of dollars to either build new homes or substantially renovate their existing properties. Saying the grant worked would be an understatement. Now in the perfect storm lets add COVID-19 restrictions in place on global freight and shipping containers on materials.

The effect this has had on builders in particular is that they really need to be cautious about their business planning as this can effect the next couple of years. There are rising numbers of developers and builders handing back hundreds of contracts and refunding deposits due to skyrocketing residential construction costs stemming from the supply constraints. What this means is in the past some builders have quoted an all-inclusive price. That would mean they would quote for example $390,000 for the labour materials. However, it is now showing us that due to the lack of materials the price has also raised for these. Some builders have been caught out and have been stuck to cover the difference. Now, it would seem the way to quote is materials plus labour cost. This means the materials cost falls back on the client rather than the builder.

Australian Dream to Build the Struggle

With an ongoing shortage or supplies there are a few things that future new home owners are having to deal with. Firstly, if they are renting, they are constantly relying on their current lease to be extended until the final build date. Some tenants are opting for a 12-month lease even though it may only be another 6 months for completion for two reasons one, build time has nearly doubled; two, to please the landlord – to ensure they do not end up homeless or looking for a rental in a low supply to demand market.

In addition to this, the supply cost may indeed have increased their borrowing capacity putting financial strain to comply. Between the timeframes, costs of building, and restarting on current living circumstances it will be a relief when the property is finally built.

There are a number of materials that are in shortage this ranges from Lumber to steel to electrical supplies such as copper wire and lighting supplies. There is not just one solution to this shortage. In turn meaning prices are more than doubling, in some cases jumping several times. On top of the high demand to supply there are natural disasters that have a contribution for example the 2020 Black Summer bushfire which included 247,000 acres (10%) of the country’s softwood plantations. Not to mention global freight and shipping container hold ups due to the tight restrictions around Covid -19. Never fear your property will get built however it will take time, and some extra funding.