There has been widespread reporting of the significant increases in build costs that the building industry has faced over the past couple of years. We recently published a blog on the causes of these increases (you can read it here).
This has caused some people to consider delaying their building project in the hope that build costs will fall in the future. But is this likely to happen?
Jeremy Gates, our Managing Director, was recently interviewed by the Australian Financial Review about this complex issue and the impact it is having on consumers.
Jeremy said that he has had to have some open & realistic conversations with clients about price increases over the past two years.
Although most people doing a renovation or a new build have an idea in their heads about how much it will cost, a surge in timber, steel and concrete prices since the onset of the COVID-19 pandemic has often led to the original build cost estimates being blown out of the water.
According to the Australian Financial Review, although the omicron wave has peaked in Australia and most coronavirus restrictions have been lifted, the global supply chain issues and pent-up demand that have plagued the sector are set to remain for the rest of 2022.
The Association of Professional Builders co-founder, Russ Stephens, told the Australian Financial Review that prices were unlikely to ease any time soon.
He said timber prices had risen by 50 to 100 per cent in 2021, steel by 30 to 60 per cent and concrete by 20 to 40 per cent. This has added 15 to 50 per cent to the construction cost of a $500,000 home, he said.
This is consistent with the price impacts we are seeing on our projects. And we are still receiving emails from suppliers at an alarming frequency advising of significant price increases. For example, we received an email from our timber supplier last week advising that, on 1 March, the cost of structural timber will increase by 15% and there will be a further 10% on pine.
Another concerning issue we can see looming is a shortage of skilled labour, which is expected to increase labour costs.
Although there was, for a time, a prediction that material costs would plateau and perhaps fall as international supply chains recovered, this is now not expected to happen. There is just too much demand for builders and suppliers to handle (in Australia and internationally).
Mr Stephens’ advice is that renovation costs ‘are not going back down again, that’s for sure’. Unfortunately, we haven’t seen any evidence that indicates otherwise.