Soaring demand in the construction industry in Western Australia could see some companies “going bankrupt in the boom,” according to a regional builder.
- Geraldton builder says some companies could ‘go bankrupt in boom’ due to delays in material supply and price increases
- In response to the COVID-19 pandemic in 2020, federal and state governments introduced grants to encourage people to build homes
- Materials prices have risen by up to 40 percent, adding $ 40,000 to overall construction costs in some cases
Last year, up to $ 45,000 was offered in state and federal building grants to households in Western Australia as part of pandemic-induced stimulus measures.
Geraldton builder Warren Taylor said the subsidies had caused an increase in demand for construction statewide, which was now peaking.
“Everything has changed – the whole shooting game,” Mr. Taylor said.
‘Broken in a boom’
Being busier than ever might seem like a good thing, but Mr Taylor said the activity is creating headaches for businesses like his.
“People say it’s a big deal to have – the funny thing is they couldn’t be further from the truth,” he said.
Building materials such as lumber and steel are scarce, which Taylor says leads to price increases of more than 40 percent in some cases.
In new contracts, this could result in an increase of $ 50,000 in the overall cost of a home.
“The price hikes we’ve gotten through this year are just unprecedented – price increases of over 30% and 40% for some products in the past two months, and our margins aren’t that big.
Construction times double
Growing demand for lumber and steel across the country has seen wait times drop from two weeks to over three months, further delaying construction.
Mr Taylor said people looking to build a new home would be incredibly lucky to move in before next Christmas, with construction times more than doubling to at least 18 months in most cases.
“It’s not just me. It’s every person in the industry,” he said.
“That’s the frustrating part – it spills over to our customers. It’s just crazy.”
Live better without subsidies?
Supplier price increases are now factored into the cost of new construction contracts, which Taylor says will offset financial increases in federal or state construction grants.
Looking back, Taylor said, the industry and customers might have been better off without the subsidies.
“It has incredibly boosted the industry – the amount of construction going on is just crazy,” he said.
However, Mr Taylor said it was good for people to have the chance to enter the market.
“It gives people, especially first-time buyers, a chance to get into their new home, which they might never have been able to afford before.