In 2021, the cost of building a new home increased by 20 percent. A number of factors such as; material shortages, disrupted supply chains and a bigger demand for skilled tradespeople all contributed towards this increase.
It is now set to be even more expensive to build a house due to a 35 percent tariff increase on imports from Russia and Belarus imposed by the federal government.
Builder Sonny Fulton has had an extremely difficult 18 months. Despite being in the middle of a building boom and working harder than ever before, his Rockhampton business is losing money.
“It's very hard. Sometimes you don't want to be in the industry anymore. If this is going to be it for the next two or three years, I'll be saying goodbye to it because you just can't sustain it,” says Sonny Fulton.
Master Builders deputy chief executive Paul Bidwell says that while timber from Russia and Belarus accounted for a small portion of Australia's overall lumber imports, it included laminated beams used as structural supports in new house construction.
Mr Bidwell says that the tariffs were another hit to an industry already under pressure because of supply chain delays and soaring building costs.
"That will add $6,000 to $11,000 to the cost of building a new home, and that's just come out of thin air," says Paul Bidwell.
Mr Bidwell said the duration of time it takes to build a house had also doubled in the past 12 months
"It might have taken three or four months to build a new home, and now it's taking eight months. It's getting worse. On top of all the covid-related supply chain issues and on top of this global boom in building all these things just piling on,” says Paul Bidwell.
For people like Sonny Fulton, the increased tariff on imported timber has added to the already soaring costs of running his building business.
"It's a big chunk for us that we have to wear. With the added cost of the timber going up, it just never ends,” says Mr. Fulton.
Mr. Fulton said he had just finished building a house that he initially quoted to cost $380,000 in mid-2020.
It ended up costing close to $480,000 to build.
Mr. Fulton says that given the contract was fixed price, he had to bear the extra costs.
"So we're not making any money, we're actually losing money, but we're working harder for it," says Sonny Fulton.
Mr. Fulton says he is now only doing variation contracts.
"We can't quote anything if you quote a client more than a month out, you just don't know exactly what price hikes you're going to get. We've scared off six builds because of the way that we set up that contract,” says Sonny Fulton.
The banks aren't approving these houses because they want fixed price contracts, so it makes it really hard. You're trying to give the client what they want, but at the end of the day it could go $80,000 or $100,000 over what they can afford,” continued Mr. Fulton.
Half of Australia’s Construction Companies Are on The Brink of Collapse
A grim warning from a building insider has revealed that more than half of Australia’s construction companies are in trouble and on the brink of collapse.
The collapse could result in thousands of Australians having their homes impacted in the upcoming months.
Russ Stephens who is the co-founder of the Association of Professional Builders, who has estimated around 50 percent of Australian building companies are currently trading insolvent. This means they can’t pay their bills.
If more construction businesses collapse this could result in a large number of customers forking out hundreds of thousands extra to get homes completed once a company collapses.
“Just one building company collapse could literally impact thousands of consumers. It’s easy for a large company to delay a decision to go into liquidation by six months or even a year. However, as we get towards the end of the year it’s probably safer to predict it could be thousands of consumers affected by collapsing building companies,” says Russ Stephens.
A large number of building companies have lost a lot of money in the past 12 months. According to Mr. Stephens many construction businesses have lost between 15 and 50 percent. However, they have not been able to pass on costs to consumers due to fixed priced contracts.
“Builders have had to absorb the costs but what has compounded the problem was not just the rise in materials prices, but also the delays due to Covid. Builders have a limited amount of projects they can take on at any one time and when a project usually takes 25 weeks but has pushed out to 30 weeks, it means fixed expenses go up but the cost to the consumer stays the same. So, there is less revenue and their profitability plummets quite dramatically due to delays and those factors combined to result in builders losing money all throughout 2021,” says Russ Stephens the co-founder of the Association of Professional Builders.
The concerns about more construction businesses collapsing come about as two major Australian construction companies including Gold Coast based business Condev and industry giant Probuild have already gone into liquidation in 2022. On top of this smaller operators like Hotondo Homes Hobart have also closed their doors in 2022.