In May 2020, not long after welcoming their first child, Fiona and her husband decided to embark on another exciting adventure: building a new home for their growing family.
Fast forward almost three years and Fiona has just given birth to their second child, but the family’s house in regional South Australia is yet to be completed, with trade and material shortages sending timelines spiralling.
“It’s things like getting timber, that was another 15 weeks or 16 weeks’ [wait],” she says.
“We’re really lucky because we’ve got a brickie already. Lots of people are building with the same [company], and there’s lots of houses where they’ve just had to wrap the house and start on the inside.
“They’ve almost completed inside but they don’t have bricks on the outside, because there’s no brickies around or they’re inundated.”
For those trying to build, it’s a predicament that hits close to home — literally. As domestic and international factors increase pressure on the nation’s construction industry, swathes of Australians are facing delays.
With warnings the impacts could continue into the new year, the forecast for 2023 is a mixed bag.
Your quick guide
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Why have there been delays? A combination of factors, including government stimulus for the building industry, and supply chain issues and workforce shortages borne from natural disasters, the COVID pandemic and war in Ukraine.
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Will things improve in 2023? Availability of materials and labour is expected to improve, but experts say a backlog of approvals from the HomeBuilder grant means demand is likely to remain high.
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Will building a home get cheaper? The cost of materials is not expected to return to pre-pandemic levels, although price increases are slowing.
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First, let’s go back a bit…
According to Flavio Macau, a lecturer and researcher in global logistics and supply chain management at Edith Cowan University, challenges plaguing the sector come down to a combination of factors including government stimulus for the building industry and supply chain issues borne from the COVID pandemic.
Dr Macau says cracks began to emerge with the announcement of the federal Homebuilder scheme in June 2020, which provided up to $25,000 towards building a new home or renovating an existing one.
“What happened was interest in the sales skyrocketed and then demand that was expected to be stable or go down suddenly raised sharply by about 40 per cent,” he says.
“So what you have is this huge, huge, huge number of people that are looking for a new house, and then lots of builders selling houses like crazy. The problem is that there was no thinking about the consequences to the supply chain.
“Everyone was happy selling houses, the government was happy because they were avoiding a recession, but no-one asked the question, ‘do we have enough materials to build those homes?'”
Fiona and her husband, who signed with a builder in December 2020, initially expected their home to be completed in about 26 weeks.
But within a few months, it became apparent the timelines would have to be shifted. Their current estimate is June 2023.
“We knew the Homebuilder grant was inundating the system, which is understandable, it was a fantastic opportunity for lots of home owners,” Fiona says.
“But the dates we were getting given for going through council and planning and stuff, we realised ‘oh, this is going to be a long time’. There were just so many people that wanted to build.”
Here’s why it’s taking longer to build and renovate
While residential construction has experienced unprecedented demand, booms in new builds and renovations haven’t been isolated to Australia.
Tom Hewitt, a senior economist with the Housing Industry Association, says a similar trend has occurred across the developed world “for pretty much the same reasons — the pandemic, low interest rates and often government stimulus”.
“So that explosion in global demand for building materials happened at the same time that global supply chains are really having a hard time being shut down and then attempting to turn themselves back on again,” he says.
“It has been the single biggest boom that Australia has ever seen in detached home building and renovations because of that stimulus, but that wouldn’t have been as much of a problem if it didn’t happen at the same time that it was happening all over the world.”
Amid increasing demand for materials like timber and steel, which Mr Hewitt says are “needed early on in most housing booms”, construction time frames and costs have blown out.
He says the first phase of projects undertaken as part of the HomeBuilder grant scheme “didn’t take into account the massive increases in building costs”, leading to the collapse of some businesses.
Natural disasters at home and abroad, alongside Russia’s war in Ukraine, have only exacerbated supply chain issues, further increasing costs of timber and oil among other products.
“You cannot rush into something else while you wait for timber, while you wait for steel — you simply have nowhere else to go,” Dr Macau says.
“So what’s happening to consumers is that they see that they have to pay more for their home.
“Even if you have the money, the next question is about when you will get your home, because almost no-one is being able to reach deadlines.”
The unexpected costs ‘blowing out’
Over in the NSW Riverina, Lisa Frost and her wife Jules are all too familiar with the challenges at hand.
“We’ve been living in a caravan and attempting to get something built, but it’s proving difficult just financially,” says Lisa from their property in Maragle, near the Snowy Mountains.
“We thought we’d be [in the caravan] for maybe a year.”
Lisa and Jules were living in the Blue Mountains when the Black Summer bushfires of 2019-20 tore through their Maragle property, some 500 kilometres south, where they had long planned to retire.
While they lost infrastructure like water tanks and a wood shed, they didn’t have a permanent dwelling there. Surrounded by those who had lost their homes, they decided to wait to begin construction on a house.
Trying to secure easy (and fast) access to labour and materials in rural Australia is difficult at the best of times, but as time passed and wider workforce shortages and supply chain issues emerged the couple have been forced to rethink their options.
“It’s things like the cost of getting flooring, we purchased it from Victoria,” says Lisa, who moved to Maragle permanently in January 2021.
“It’s $3,000 or $4,000 just to get [it up], and then they can’t deliver all the way.”
Their rural location means the rising price of diesel has also started to affect their bottom line, with companies increasingly forced to pass on the costs.
To build on their property, the couple must complete a Bushfire Attack Level (BAL) assessment, a method for rating the intensity of a location’s potential exposure to bushfire, which requires surveyors.
A few years ago, it cost about $2,200 to complete an assessment in the area, Lisa says. In recent times, she was quoted $4,500.
Fire Protection Association Australia, the national peak body for fire safety, points to the increasing cost of oil internationally, which has had a “knock-on” effect for supply and cost of goods and services in the building and construction industry.
“While it’s correct that impacts differ, it’s fair to say that all assessors have seen increases,” chief executive John Kilgour says.
The outlook for 2023
With few industries immune to the pressures brought by domestic and international factors, building challenges are expected to linger into 2023 — although to what extent depends on who you ask.
According to Mr Hewitt, some of the material constraints are beginning to come off, with some builders reporting that “they’ve got piles of timber waiting for them on the construction site”.
But their “number one constraint” is now labour, he says, pointing to acute shortages in trades like bricklaying, carpentry and roofing due to the closure of international borders during the pandemic.
“So obviously we lost access to global labour pools. Now those workers are starting to come back and we expect those labour constraints to continue easing into 2023,” he says.
“[The surge in prices] has started to slow and we expect it to continue to slow, but unfortunately, if history is any indicator, those prices probably won’t go backwards,” he adds.
“We’re not expecting them to go back to pre-pandemic actual dollar levels.”
While Australia has “stopped the acceleration” of new builds Dr Macau believes a backlog in approvals from the HomeBuilder grant means 2023 may hold “a bit of the same”.
“Interest rates are going up, that will change the market,” he says.
“But we’ll still have such a huge backlog of approvals coming from HomeBuilder, because some people who got the money started building in mid-2022.
“So all the money that came to HomeBuilder was not [spent] in only one or two years. It has a long term effect on the industry and we will feel that effect at least until 2024.”
It’s an uncertain path ahead for some
In practical terms, Dr Macau says, it means that unless you’re “willing to pay top dollar”, you will have to be “a little bit lucky to see those contracts being delivered on time and on budget”.
Having now secured a bricklayer, Fiona is hopeful that their next chapter will begin in June as planned.
But after lengthy delays, she’s not counting her chickens before they’ve hatched.
“[June] would be fantastic, but we really have no idea,” she says.
As for Lisa and Jules, at the mercy of factors beyond their control, they’ve decided to “get in and build what we need to build”.
“We want to have a hand in doing it,” Lisa says. “We just do what we need to get things along.”
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