Constraints ease, but costs still on the rise

According to the Housing Institute Australia (HIA) Trades Report for the March Quarter 2023, Australia is experiencing one of the most severe shortages of skilled tradespeople in recent history.

The Trades Availability Index registered -0.75, indicating a significant scarcity compared to the previous year's index of 0.90.

Tom Devitt, Senior Economist at the Housing Institute Australia, highlighted that the shortages are particularly acute in regional areas, impacting trades such as bricklaying, carpentry, and roofing.

However, he also noted that as more workers arrive from overseas, the industry can expect a gradual return to equilibrium, with home building and renovation timelines improving.

While the rate of increase in the price of trades appears to be moderating, builders are still grappling with rising costs due to the persistent skilled labour shortage.

Director of Kennedy Builders Chris Kennedy acknowledged the challenges faced by the industry in recent years.

“While we didn’t have a shortage of supplies, there was a period where we had no control over prices which was a challenge,” he said.

“We didn’t suffer as much as some other companies, and we got through our workload quite well thanks to good relationships with our subcontractors and a good team of trades.

“The pandemic, all the stimulus as well as people shifting all at once created one of the busiest periods in history. Thankfully things have normalised a bit, but we still have a good volume of work in front of us. It’s a much better pace than what it was two years ago.”

Hadar owner Rick Leeworthy said his business had experienced issues with skilled worker shortage. In the peak of the boom (12 – 18 months ago) Hadar were experiencing a significant shortage which resulted in jobs taking twice as long.

“Tradies were working seven days a week which we also found was putting extra pressure on their families,” Mr Leeworthy said.

“On top of the region wide skilled shortage affecting all of our offices, our greatest challenge was Yarrawonga. Yarrawonga seemed to have a great growth per capita than most towns and because of that exponential growth, the trade base in the community wasn’t big enough.

“Then when there is a shortage of supplies, it increases the price which we saw a great deal of over the past two years.

“We had to pay more for materials and tradies to keep the jobs moving which does significantly affect profitability. The good news is, we are seeing it come back into line now and trades are getting more competitive as the workload normalises.

“We have never seen anything at this scale before however we are seeing the market come back into some form of order now as things settle down. Our biggest challenge now is councils, engineers and town planners, there is still a massive shortage there.

“This backlog of work in the system with council is slowing down the process of getting permits, leaving developers struggling to create titles.”

Lekeal Builder Company Director Ken Stevenson also said that the last 18 months have been a struggle for all building contractors and in certain aspects, things don’t look to be easing anytime soon.

“Costs are very challenging and have been for 18 months, to find skilled labouring in the local market has been very challenging,” Mr Stevenson said.

“In fact, I believe costs have gone up 35 percent in that time on builds and I can’t see them steadying off much particularly when the 7-star rating comes in in October.

“The new land tax rules announced in the recent Victorian state budget for investors will have a reduced threshold down to $50,000 which will put more costs on investment properties.

“The thing I am most upset about is young people will find it even harder to buy and build their own home.”

The new National Construction Code (NCC) commenced on May 1, with a transition period to October 1, to assist the industry with its transition.

New rules increase the minimum energy efficiency standards for new homes from six to seven-star ratings when using the Nationwide House Energy Rating Scheme (NatHERS).

Seven-star homes are cheaper to heat and cool, more comfortable to live in, and more resilient to extreme weather, but cost more to build.

Regional builder and Afonso Building Solutions director David Afonso who services Yarrawonga, Corowa, Rutherglen, Albury-Wodonga and Wangaratta said after the unpredictability of the last few years, there’s a lot more confidence for builders moving forward.

“Things have calmed down a bit this year which is better for builders and customers. We’re seeing more normal timeframes,” Mr Afonso said.

“The most difficult thing over the pandemic was the fluctuation in material process and tradie availability which made everything blow out with times and costs. Builders were the ones that had to absorb the majority of that.

“It’s well publicised that a lot of builders didn’t survive that, but we are heading into more normal times. We’re glad to be on the other side of those unpredictable times.

“There’s a shortage of skilled workers nationally. I know the government is talking big numbers in immigration for skilled labour so hopefully that will assist in the industry, and other industries as well.

“The other thing we are now contending with is the national construction changes. Builders on the border, Victoria and NSW, have different changes coming through at different times. Just as we got out of covid, and thought we were heading into nice clear waters, the state governments go and throw a few different spanners in the works.

“It’s actually more difficult for builders on the border to try and get their heads around two different sets of rules. It surprises me still that we don’t have a national building license or regulations for building homes.

“Border towns, particular smaller centres just get punished having to build homes two different ways. These complexities add costs. The energy rating for housing sustainability is getting stricter which will also add more costs. However, we can plan these costs because we know they’re coming.”

Master Builders Australia recently raised concerns about the lack of big-picture fiscal policy measures from the federal government budget to tackle rising interest rates and high inflation.

“It’s accepted across the board that business, including small business, is leaned on to spearhead economic recovery, but there have been minimal measures in the budget to boost business productivity,” Master Builders Australia CEO Denita Wawn said.

“Our industry has moved backwards over recent years in terms of its productivity performance. The budget has missed a chance to allow for more favourable outcomes when it comes to the cost, quality and quantity of building and construction output.

“The large economic footprint of the building and construction sector means that better productivity in our industry will flow to many corners of the whole economy and benefit the living standards for Australians.

“A cloud of uncertainty now hangs over the next tranche of industrial relations legislation, and we urge government to avoid productivity sapping changes that undermine the very fabric of small business: flexibility, entrepreneurship and choice.

“At present, builders are facing a shortage of key tradespeople whilst substantial industry transformation is underway for a net zero economy.

“Around half a million new building and construction workers are required by the end of 2026. As the population is expected to grow, more support is required to attract, train and retain workers in the industry.

“The pain of higher interest rates and high inflation is real and if we do not get it under control we could be in for a lengthy period of pain and depressed construction activity.”

Mr Schmitke said governments must lift the handbrake on the building and construction industry by bringing down the cost of doing business.