Soaring materials costs and supply chain disruptions are hitting Queensland’s building and construction industry hard, dialling up the pressure on businesses.
Fixed price contracts are the main pain point, with most builders and subcontractors at the end of the chain unable to absorb extra cost. This means that as new contracts come into play, these businesses will be left with no choice but to pass costs on to consumers to stay afloat.
“This situation is not just about the price of fuel anymore. From early on, we’ve been hearing consistent reports of materials cost hikes of between five to 50 per cent, and the cost to build a new house rising by $10,000 to $15,000,” Master Builders CEO Paul Bidwell said.
“Now, early results from our member survey have delivered a huge wake-up call. Project costs are being reported as being up by six to 10 per cent.
Eight per cent of respondents said they’ve already had to stand workers down. Plus, clients are pausing projects, meaning demand for new builds is drying up at a time we are already not meeting our housing accord targets.”
Mr Bidwell said many wanted government financial support – so they don’t go broke, and homes aren’t left unfinished.
“We learnt during the pandemic just how damaging supply shocks can be to the construction industry – we cannot afford a repeat,” he said.
“We want our industry to know we hear you – and you’re not alone. We’re at the table with government, sharing what you are telling us so solutions can be found, now.
“We need everyone in the contractual chain including clients, to work together to ensure all parties are impacted as little as possible. This needs to start with government allowing flexibility in its own contracts.
“It’s also critical we have the banks at the table to help clients manage cost increases so that projects are finished, homes get completed, and businesses survive.”
It comes as the latest regional building approvals figures from the Australian Bureau of Statistics (ABS) show a further plunge in approvals of new units (-4.0 per cent) and detached homes (-1.9 per cent) in three months to February.
The majority of the regions recorded weakened approvals during the same period, apart from the Sunshine Coast (+35.1 per cent) and Central Queensland (+9.5 per cent).
The data also shows an unprecedented amount of money being spent on delivering new housing, with a new record set at $25.6 billion worth of homes approved in the 12 months to February. High-end projects are increasingly the only ones viable and the average value for new construction is now hitting $787,342 per dwelling – up from $517,476 a year ago.
“In the current context, we can little afford more price hikes or expect them to not have a significant impact on the delivery of new homes,” Mr Bidwell said.
“We’ve been through this before with the pandemic. We’re doing all we can to stop history repeating itself,” Mr Bidwell said.