Bowens - The Builders Choice

Industry News
Fiona Nield

HIA’s latest New Home Sales report, a leading indicator of future detached home building, found that sales of new detached homes in Victoria climbed 4 percent in April, marking the second consecutive monthly increase.

Despite HomeBuilder incentives ending more than a year ago, new home sales continue to remain elevated, an indication of the underlying demand there had been for housing in Victoria.

HomeBuilder was the catalyst for bringing this demand to market, but record low interest rates, the pandemic-related desire for more space and amenity, and an economic recovery have all further contributed to driving demand.

This has generated a pipeline of work that will keep Victorian builders employed and busy well into 2023. The pandemic caused similar housing booms all around the world with households shifting their spending away from discretionary spending on travel, entertainment and eating out, towards their homes and consumer goods.

The challenge, however, for Victorian builders has not been on the demand side, as there has been increased consumer demand for housing, but on the supply side with huge demands on building materials and shipping services in Australia and around the world.

The average price of key home building materials in Australia have risen by 15.4 per cent in the last 12 months – the fastest rate since 1980, and three times the rate of inflation over the same period.

“The average price of key home building materials in Australia have risen by 15.4 per cent in the last 12 months – the fastest rate since 1980, and three times the rate of inflation over the same period.”

Some key costs were much higher with steel and wood products increasing by closer to, or in some cases more than 40 percent. Shipping cost rises for building products have been dramatic, with the price of a 40-foot shipping container rising from under $1,500 to more than $11,000 at one point.

Then there is fuel. Surging oil prices from late 2020 and more recent price spikes have significantly increased the cost of supply and operations for Victorian builders.

There are signs that supply constraints are easing, but slowly. Shipping containers were recently back down to almost $8,000, and timber prices internationally are easing.

Recent global interest rate rises, perhaps most importantly in the US, are likely to reduce demands on building materials and other goods internationally.

“Recent global interest rate rises, perhaps most importantly in the US, are likely to reduce demands on building materials and other goods internationally.”

This will make it easier for supply chains to cope, even though higher interest rates alone won’t fix the supply chain constraints themselves.

Notwithstanding all other factors, the key issues facing Victorian builders this year will remain the availability of land, labour and materials, with the ongoing demand for housing keeping them at capacity longer than forecast.

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