Small home builders and residential tradespeople continue to thrive throughout Australia despite COVID-19 as low interest rates and stimulus programs continue to drive activity.
On a per-builder basis, Buildxact says the number of quotes which were submitted on its platform during the final quarter of 2020 was up by 8 percent when compared with the previous corresponding period in the final quarter of 2019.
Moreover, the seasonal activity decline which typically occurs at end of the year was less pronounced in 2020 compared with earlier years.
In 2019, the number of estimates submitted on Buildxact dropped by 7 percent in the final quarter compared with the third quarter of that year.
In the final quarter of last year, estimating activity was down by only three percent.
Leading the way was Western Australia, where estimating volumes increased during the quarter notwithstanding the typically quieter period.
Queensland also performed strongly, with the average number of estimates per builder declining during the quarter because of seasonal factors but coming in 41 percent stronger compared with the December quarter of 2019.
Even in Victoria, which has been impacted by lockdowns, average estimate volumes per contractor increased by 5 percent.
In its report, Buildxact says demand for small builders and tradespeople is being driven by low interest rates and stimulus from the Commonwealth HomeBuilder program.
“Overall demand for small builders remains high with a favourable lending climate including low interest rates, personal savings at an all-time high and government incentives,” Buildxact said in its report.
“This is helping to maintain confidence among home buyers and renovators despite the ongoing disruption caused by COVID-19.”
The latest report comes amid ongoing evidence of strong activity in detached home building and home renovations as buyers rush to capitalise on HomeBuilder.
Recent data from the Australian Bureau of Statistics shows that on a seasonally adjusted basis, the number of loans made to Australian households for the purchase of constructing an owner-occupied dwelling rose to its highest level on record during January.
Whilst the strength of market conditions is beneficial overall, signs are growing that constraints on labour and material availability are leading to upward pressure on costs.
In a report issued last week, property and construction information services provider CoreLogic said the average cost of building a new detached home across Australia rose by 1.0 percent in the December quarter and by 3.6 percent throughout calendar 2020.
Despite this, average margins for estimates on Buildxact have risen from 14 percent in the December quart of 2019 to just under 15 percent in the December quarter last year.
Buildxact CEO David Murray said the busy market had enabled builders and tradespeople to pass on higher costs to consumers.
“This increased demand by home builders and renovators, has placed significant demand on the supply of materials, impacting the component price,” Murray said.
“Rather than absorb this cost in the margin of the jobs, the Builders are maintaining their margin levels and passing the increased material costs onto the customer.
“In Buildxact’s view, this is due to the fact there is such a large volume of working being quoted and delivered.”
Going forward, Murray cautions of potential headwinds in terms of supply constraints and impacts on consumer confidence should any further snap-lockdowns occur such as the recent lockdown in Victoria which closed construction.
Still, he remains optimistic.
“Residential custom home building and renovations has proved mostly resilient through the pandemic,” Murray said.
“Strong quote volume in Q4 2020, coupled with an improving economy should see this continue.”