The Australian construction industry is facing a critical material shortage resulting in severe financial consequences for contractors and home-builders alike.
The shortage comes down to two main factors – increased investment in home construction and renovations and the loss of local timber in the 2020 Black Summer bushfires.
Housing Industry Association economist Angela Lillicrap told ABC News that 2021 is expected to reach more than 146,000 detached home builds, 20 per cent higher than the 2018 housing boom.
However, with steel and construction timber, including framing, laminated veneer lumber and beams in extremely short supply since late 2020, contractors are facing uncertainty in the industry and anxiety of the downturn ahead.
Nationwide shortages are only exacerbated by low interest rates and COVID-19 logistical delays, the pandemic seeing Australians investing their newfound time and spare funds in home renovation projects that created a huge surge in demand for building materials that cannot be satisfied.
The government’s HomeBuilder scheme, designed to keep tradies in work during the pandemic, further accelerated this demand.
This scheme offered grants of up to $25,000 for those building new homes within the next six months, leading to a rise in material prices and delay in delivery.
Sunshine Coast builder Mitch Butler told ABC News he was losing an average of $15,000 on each house he was building.
“All your frames and trusses, roofs, carpenters, concrete, everything’s going up in price, but the problem for [builders] is that we’ve signed a contract, so we’re stuck at that contract price.”
Butler emphasised that builders are also at risk of having to pay liquidated damages of $50 for each day a house is delayed after the contractual end date.
“The public needs to know that housing is going to take longer,” he stressed.
With the 2019-2020 Australian bushfire season eliminating a considerable amount of the nation’s hard- and softwood supply, many suppliers are looking to source materials from overseas.
However, outsourcing timber has proved challenging, Matthew Pollock from the Master Builders association telling ABC’s Ellen Coulter construction has also been booming overseas, meaning international supply chains are stretched as well.
With $300 billion of new infrastructure projects announced in the latest federal budgets according to the Australian Financial Review, we could be facing significant project delays and cost blowouts.
Deputy Chief Executive of the Australian Forest Products Association, Victor Violante, told ABC’s Sandra Morello these circumstances highlight Australia’s need to become self-sufficient regarding sourcing vital construction materials.
The pandemic has also created supply chain issues, with builders and contractors reporting delays from anywhere between 4-12 weeks for certain imported building materials and parts due to on-shore stock levels being depleted and the disruptions to supply.
Materials are not the only shortage the industry is facing – a lack of tradies available in construction, especially wet trades, means increased wages and several construction projects are being placed on hold.
Usher Group National Sales Manager, Mikel Nyholt, says subcontractors are being forced to renegotiate labour and material prices in light of the inflations.
“The imminent shortage in our trade is severely affecting our capacity in certain regions, particularly in early trades but also in finishes trades as well,” he said.
Mikel also cited difficultly when dealing with clients who are running projects on budgets from 12 months ago.
In addition to a labour shortage, the cost of wages has seriously risen throughout the supply chain and the prices of raw materials have effectively gone through the roof, with increases every three months for some supply items.
“In response to this, our business is faced with raising our current rates to ensure we are sustainable to deal with the increases and shortages we are already experiencing,” he said.
Fortunately, the federal government is already attempting to ease the increased demand by allowing builders an additional 12 months to start construction with HomeBuilder grants.
However, pressure will still be felt from all sides until supply can catch-up with demand.
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