As Australia continues to face a strong housing boom and a limited supply of materials, the cost of construction is on the rise with no signs of slowing down anytime soon.
The director of Abode Construction, Justin Andrews states that "there are a number of factors contributing to this cost increase, coming together to create a perfect storm".
Some of the factors include a huge increase in demand generated by the HomeBuilder grant which was released early on in the Coronavirus pandemic, a spike in interstate migration, relaxed mortgage lending criteria and the government's early access to superannuation access scheme, all in an environment of continued record low interest rates.
These aren't the only factors. Ongoing natural disaster insurance repair work in Queensland continues to monopolise many trade contractors such as roof installers and carpenters, only a fraction of the workforce is available for new residential projects in Brisbane.
In addition to this, Imported materials are still being delayed by Covid supply chain disruptions - mainly from China. As the United States is also in the midst of a building boom, exporters are willing to supply to the highest bidders, which has created a surge in the price of materials such as timber and steel. But there are ongoing problems across the board.
"We have received sudden price increases with practically next to no notice on almost all building products we use." says Justin Andrews.
As the price of building materials continue to climb, the cost of construction has skyrocketed - without an increase in the value of the property once it's finished being built.
"Real estate valuers do not see that the house is worth more simply because the costs of construction have increased." says Justin Andrews
Some home builders have opted to include special conditions or provisional sums in their contracts to deal with the problem; however, many have had those contracts rejected by mortgage lenders and banks. Often these special conditions and provisions are not legally enforceable as you are required by legislation to ensure that you have certainty in domestic building contracts with very few exceptions.
While acknowledging that there will be some small fluctuations over time due to inflation or other economic changes, Justin predicts that it will not get back down to pre-construction levels any time soon.
