Tradies, builders, developers on alert as material prices run amok
A Covid-19 fuelled building boom may be a godsend for tradies and builders, but material shortages and prices running amok now threaten to stifle this key part of the economy if left unrestrained.
A desperate shortage of materials and labour in the wake of Covid-19 restrictions has seen an unprecedented surge in prices, some by as much as 200 per cent such as timber, forcing many in the construction industry to the brink of collapse, warned Tradies In Business co-founder Nicole Cox.
She said unless greater supply chain certainty and assistance was provided soon, many tradies and builders would hit the wall.
The post Covid-19 building boom including state infrastructure investment and homeowners pouring funds into renovations and new builds saw an unprecedented surge in demand for construction, but that pressure can’t be maintained under current settings, especially now that the Olympics were coming to Queensland, Ms Cox said.
“Now that so much of the country is in lockdown and this announcement with the Olympics there will be some big hits coming in the very short term which will have a long lasting effect. The government needs to do more to support both builders and subcontractors. There are complexities in contracts that mean builders and subbies are having to negotiate delays with clients and if they are not successful, it has a financial fallout.”
Latest Master Builders survey results show trade supply pressures across almost all 15 categories of product required by builders and tradies, with the greatest difficulty being faced chasing down timber, other wood products, windows, steel products and roofing supplies, impacting bricklayers, carpenters, concreters, electricians and floor finishers with “longer-than-usual delays in accessing the product as well as price increases”.
Warrick Bidwell, Tradies in Business.co-founder, said “the bushfires and the floods that followed had a massive impact on Australia’s timber industry. Now the delays caused by Covid have added to a ripple effect which is spreading across the country”.
“We are already seeing major timber suppliers unable to take any new orders until 2022. We’ve also got manufacturers working to social distancing capacities so their capabilities have halved. There is genuine concern that these issues and other shortages will lead to the collapse of the industry.”
Among projects that have been pulled back because of the high cost of construction is Brookwood Lutwyche by Ferro Group, with buyers informed via email that “unfortunately, due to Covid and other issues beyond our control, we have been unable to finalise a build price that makes the project viable”.
The development email said “construction costs in Queensland have skyrocketed as a result of a number of significant contributing factors. These are mainly based around the Covid-19 pandemic and include supply chain issues with imported materials, rapidly rising costs of steel, timber and concrete and a lack of labour caused by the current building boom which is driving up prices cross the board”.
Ms Cox said material shortages and price increases could see many people not get the new homes they were counting on.
“It is also only going to be a matter of time before Australian tradies start putting serious pressure on the Government to stop sending the resources we need at home overseas. Perhaps there is another solution around a more organised method of distribution but either way, discussions need to happen now.”
Master Builders deputy CEO Paul Bidwell said the sector was bracing for the fallout of businesses continuing to absorb the tsunami of cost rises – with September to October expected to be the tipping point for many.
“It is a major problem in Queensland and other parts of the country right now. Our legal guys are getting hammered, like people with a $44,000 contract where the cost of things whether timber or whatever has gone up by $30,000. The builder is saying what can I do, and the answer is you can’t do anything, you signed a contract to deliver on time and on price.”
He said it was not unreasonable for a builder to be penalised for not finishing on time, but material cost overruns were now out of control with “still no end in sight”.
”It’s getting to the point where we know something will happen. It will end in tears and there will be some builders that won’t survive because they just can’t afford the loss. We think that could be September, October.”
Developers were able to cancel contracts and return deposits if the build had not begun, he said.
”There are a lot of people (builders) struggling to deliver on time and at price. A lot of builders have had to absorb those price increases. They might have been okay in December but timber alone will go up 30 per cent September 1 and again 20-25 per cent on November 1. The cost of timber has gone up 50-60 per cent in the last nine months with no end in sight.”
Mr Bidwell said while the Olympics were still way off, the civil and other works could see the sector exposed.
“It’s a perfect storm if you overlay the Olympics, we’re lucky we’ve got some time before that starts to gear up. We’re hoping the materials supply like timber will sort itself out but the rest of this year will be very problematic. Some builders will not ride it out, we sincerely hope they are few. We just don’t know.”
Tom and Jaala Frauenfelder of Ground Up Projects have weathered the uncertainties so far, by anticipating surges in prices and wearing overruns as best they can.
“The industry is booming, we cannot keep up to the funnel it’s an incredible amount of work but there’s just not the material to do it. The material shortage slows down small business, especially those who aren’t planning far enough ahead or don’t have capability to hold material in stock. There’s a really fine balancing act that will play out through a lot of small businesses throughout SEQ.”
”There will be a lot of things happening out of our control and there has to be a dialogue around that. There’s potentially going to be large corporations that come up to work on Olympic infrastructure, billions of dollars worth over the next 11 years. If these companies are offering more money for materials in shortage, they will be pulling material from everywhere for them.”
He said the Olympics were a “once in a lifetime opportunity that will be so amazing for us” in Brisbane. “Look at what Expo 88 did for Southbank which we still get to enjoy. Imagine what the Olympics will be like.”
But he said the key in the meantime was to survive by staying on top of cost overruns and material shortages. “Mums and dads need to realise the impacts that could occur which everyone needs to pay for. A bit of give and take is best for everyone’s benefit and wellbeing.”