Smaller builders suffer as HomeBuilder leads to spike in material costs

HomeBuilder has provided a shot in the arm to the housing sector, with households taking on record levels of debt to fuel the nation’s economic recovery.

But increased demand has already pushed up the price of materials and labour, squeezing the budgets of home-buyers and renovators.

According to Wednesday’s Consumer Price Index, costs associated with the maintenance and repair of dwellings rose 0.7% in the December quarter and 1.7% over the year.

Phil Dwyer, the head of small builder lobby group Builders Collective of Australia, told The New Daily the price of building materials shot up after HomeBuilder was announced in June, with most smaller builders unaware of the rising costs until they hit the shops.

And Dwyer said materials weren’t the only thing going up in price, either.

“Subcontractors within the industry are jacking up prices significantly, and that’s an area where the biggest cost hit lies,” Dwyer said.

“We’ve got an industry that’s busy, and while we have that, they’ll get away with it. For heaven’s sake, we have to do something about it because no one’s in a position to directly employ people any more.”

Gallery Group CEO Adam Barclay last week told the AFR his firm had seen the costs of frames rise from $11,500 to $12,160, steel for slabs jump 12% in “the last 90 days”, and landscape supplies soar 15%.

And Westpac senior economist Justin Smirk told the ABC developers in many cases had lifted their prices “in excess of the value of the grants”.

According to Treasury, 75,143 applications for the full $25,000 grant were lodged in 2020, with most applications for new builds coming from Victoria (17,382), Queensland (13,507) or WA (11,141).

Demand for the scheme exceeded government forecasts and prompted an extension until March at a lower rate of $15,000.

Urban Development Institute of Australia national president Simon Basheer said the scheme, on balance, was a “stellar public policy success”.

“There are thousands of people in construction and trades up and down supply chains because of the demand from home-buyers and [the] stimulus it has created,” Basheer told The New Daily.

According to the Housing Industry Association, new home sales were up 99.5% on the previous year in December.

Housing Minister Michael Sukkar this week said the scheme’s success was a “phenomenal outcome for our tradies and for our economy at a time it needs it most”.

The National Housing Finance and Investment Corporation last year released analysis showing each home build supported an average of three jobs.

🏡🛠 HomeBuilder is continuing to drive new home sales and Australia’s economic comeback. @HIA_au data shows sales in the 3 months to November were up 41%⬆️ on the same time last year. A great result for our tradies. pic.twitter.com/bnjmwb8JmY

— Michael Sukkar (@MichaelSukkarMP) December 16, 2020

But not everyone has shared in HomeBuilder’s spoils.

Many small builders have complained of a double whammy, saying they missed out on the scheme but were nonetheless stung by rising input prices as a result of surging demand.

Mildura-based builder Bruce Lee said he saw few benefits in the scheme after his firm only attracted one eligible project.

Unlike larger companies, which have off-the-plan projects ready to go when customers inquire, smaller builders have to go through a longer process to tick off all the boxes, he said.

“If someone comes to us, we say one, you have to go and get the plans shored up and then two, we have to quote them. By the time they get all that done they would’ve missed out on the $25,000 grant,” Lee told The New Daily.

“And town planning approvals for a building permit can take six weeks to go through the council, so the smaller ones get left behind.”

Up until November, new builds or renovations were only eligible if construction began within three months of the contract date, though the deadline is now six months.

Dwyer said larger companies benefitted from the lion’s share of applications, as they had the manpower needed to complete projects within the mandated deadlines and price caps.

Cumberland Building and Maintenance owner Duncan Eadie told The New Daily his firm had seen little of the extra demand trumpeted by the government and housing industry lobbyists.

“Unfortunately, a lot of this stuff doesn’t seem to flow down to us little guys … and [unfortunately] a lot of the little builders get swallowed up by the big builders,” Eadie said.

Sukkar did not respond to The New Daily’s numerous requests for comment.

This article was first published by The New Daily. Read the original article.