Building Costs Skyrocket
The pandemic has created a backlog of property developments and new home builds. It has also affected the supply of building materials such as timber, steel and roofing tiles.
The materials shortage, has resulted in delays of developments across the country. Some large commercial builders have even gone into liquidation due to their overexposure.
Construction costs have increased an average 15% and is the biggest surge in costs in 16 years. With a significant amount of residential construction work in the pipeline, many builders are forced to pass-on at least some of the costs to buyers.
The biggest cost increases have been seen in Western Australia and South Australia.
With increased costs to materials, many home owners and investors are encouraged to review their insurance policies to ensure they are not under-insured.
Whilst most new home builds would traditionally take between 3-6 months to complete, some are now taking between 6-12 months. The biggest delays appear to be in frame construction leaving many construction sites in ’slab’ mode for weeks.
Building material delays
|Material||Pre-pandemic wait time||Pandemic wait time|
|Mesh and pods||2 weeks||6 weeks|
|Frame and trusses||4 weeks||16 weeks|
|Windows||4 weeks||8 weeks|
|Bricks||2 weeks||4 weeks|
|Laminated veneer lumber||1.5 weeks||16 weeks|
Source: Master Builders Association of Victoria
The shortage of building materials has been created by three main causes; COVID, no fewer than 19 stimulus packages which have significantly pushed-up demand and national bushfires. Add to that a booming US building sector which is sucking up many international construction materials and it all becomes self evident.
Some builders are going bust, others have their backs to the wall and others are building twice as many homes as they were two years ago, but making the same amount of profit.
The current situation is contributing to the upwards pressure on property prices. With the recent announcement by the federal government for yet more incentive packages aimed at first home buyers, it’s difficult to see when property prices will level out.