The pandemic’s impact on supply chains has been well documented and is a major problem. This causes delays in the completion of construction projects. Other factors also pose a challenge to the construction industry. Prepare yourself for a downturn in the industry if you plan to start building a home in 2022. Home builders will struggle with rising raw material costs, shortages of workers, and supply-chain delays.
The shortage of construction materials and rising costs are a concern
Australia faces a shortage of construction materials, including timber, bricks, and steel. Also, there are shortages of paint, electrical components, roofing supplies, and other building materials. This is due to three main issues:
- The popular HomeBuilder Grant has contributed to the exceptional rise in construction demand.
- Part of the reason for this huge shortage is due to the bushfires that have ravaged across Australia. The lack of wood has caused the price to increase by more than 40% and is expected to cause delays in building projects until 2023.
- The building and construction industry was used by many countries, not just Australia, to stimulate economic recovery in the wake of the pandemic. Global supply chains have been stretched as a result.
Construction costs, profit margins, and delivery are all negatively affected by the gap between the supply and demand of raw materials. If you are planning to build a house this year or by 2023, expect to face higher prices and supply shortages.
There is a shortage of qualified and skilled workers in the Australian construction industry. Many companies in Australia are having difficulty finding project managers, carpenters, electricians, and bricklayers. These shortages of skills will likely increase wait times and costs.
Construction delays extend deadlines.
Master Builders surveyed in September 2021 and found that the lead times for many building materials were still much longer than they had been before. The massive supply-chain problems persist even one year after the pandemic. Builders are unable, especially in the case of timber and steel, to give a precise timeframe of when materials will arrive. Some projects are delivered six months late, and this is extremely expensive. Even a few month’s delay in the completion of construction can cost aspiring homeowners as much as $6000 to $7000 in extra rent.
If you are planning to start construction on your home by 2022, either through a contract contractor or as an Owner Builder, the costs of building your home could rise dramatically. Expect some delays. Many contractors are going out of business because materials are still expensive and difficult to obtain. The trend is likely to continue and could ruin the dreams of those who had planned to build their own dream home. If builders fail in the middle of construction, homeowners may be left with a half-built home and their savings gone.
Does Buying An Established Home Seem Like A Better Option Right Now?
You may decide to delay building for several years. If you do not want to wait to build, then buying an existing home is a good alternative. House prices are also on the decline. Domain’s June 2022 Quarterly House price report states:
- The market in Australia has finally slowed, and house prices are down across all states.
- Brisbane’s first price drop since April 2020 – near the start of the pandemic – has been recorded. Sydney and Melbourne have seen their prices fall more than 1.5% off the record high.
- The unit prices in Sydney fell by a quarter over the last quarter of June but still exceeded house prices.
There are different outlooks for each area of the country. PropTrack predicts that prices will continue to fall in Sydney and Melbourne throughout the remainder of 2022. Brisbane, Adelaide, and certain regional areas of the country will outperform due to relative affordability and changing trends among homeowners.
While the price of an existing house is going down, the monthly payments are increasing. In May, the Reserve Bank increased the cash rate for the first time in more than a decade. Since then, it has been raised each month to push the case rate up from 1.1% to 2.45% as of September. The Reserve Bank is expected to keep raising interest rates for the remainder of this year. This will result in higher monthly repayments. People who are looking to purchase a home may find that their loan power has decreased.