Almost eight in ten builders are experiencing delays and cost blowouts as the boom in detached home construction is leading to shortages in materials and trades, a new survey in Victoria has found.
Unveiling the results of its latest survey of its members, the Master Builders Association of Victoria (MBAV) said the Commonwealth HomeBuilder program had provided an important lifeline for the industry.
But it warned that massive levels of activity arising out of the program are leading to shortages in trades and materials.
Overall, 78 percent of survey respondents reported project delays of up to three weeks.
Meanwhile, costs of some materials and specialist trades/labour have blown out by up to ten percent.
In terms of trades specifically, more than two-thirds of builders (69 percent) are experiencing trade delays, with more than four in ten (41.8 percent) experiencing delays of more than two weeks.
Average delays for concreters, bricklayers and joiners are now fifteen days.
Meanwhile, two-thirds of builders are experiencing cost increases for concreters, structural steel workers and carpenters.
The shortages are arising as the detached home sector gears up to accommodate a massive volume of work associated with the Commonwealth HomeBuilder program.
As of March 12, 93,403 applications for the program had been received nationwide, including 75,256 applications for grants to build new homes and 18,147 applications for grants to renovate existing homes.
Almost one third (26,858) of these applications have come from Victoria.
All this is driving a boom in detached home building and home renovations.
In its latest forecast, BIS Oxford Economics says it expects the number of commencements on detached home building to come in at record levels of more than 130,0000 in 2021/21 and to remain at elevated levels of around 120,000 homes in 2021/22.
(This sits in contrast to the multi-residential segment of the market, which is heavily exposed to migration and which is seeing softer conditions following several years of record levels of activity.)
Master Builders Association of Victoria CEO Rebecca Casson said HomeBuilder had been an important lifeline for the home building sector at the height of the COVID crisis in 2020 at a time when demand had otherwise been expected to plummet.
But she warned that that pressures on resource and labour availability are growing.
“HomeBuilder has been a lifeline for Victorian home builders and is continuing to drive a forward pipeline of work but some of them are now struggling to keep up with demand for skilled tradespeople and some critical building materials,” Casson said.
“In collaboration with our state and national colleagues, we’re currently working with the Federal Government on potential solutions to relieve the pressure on the supply chain and ensure that the benefits of HomeBuilder are maximised.”
Builders say the impact of trade and labour shortages is significant.
Stuart Allen, director of Ballarat based building company Stuart Allen Building, says the financial effect of supply chain issues should not be underestimated.
He has not seen anything like this in twenty years of business.
“Prices are up, we’re struggling to get some trades and we’re trying to keep clients happy who just want to see their jobs happening and completed,” Allen said.
“We’re trying to build a buffer into our contracts but it’s a bit hard when you don’t know what materials and labour are likely to cost, or for how long.”
Casson says the problem needs to be addressed.
“HomeBuilder has been a huge success, but unless a solution can be found to these supply chain issues and increased costs, an unintended consequence could be negative cash flow impacts for local home building businesses, resulting in the risk of small business insolvencies and people missing out on their HomeBuilder grants,” she said.