HomeBuilder’s success has a dark side with building prices set to increase

HomeBuilder has been a raging success, but the scheme has not come without a downside for prices and other industry metrics.

Budding property owners are being urged to lock in the price of new builds with costs set to rise dramatically because the success of HomeBuilder has had an inflationary knock-on effect.

Already adjustments are being made across the industry with Australia’s leading builder Metricon tweaking their prices higher with more builders set to follow.

Metricon only adjusted their new builds by a mere $1000, brought on by HomeBuilder placing enormous pressure on the construction industry and creating a shortage in materials and labour.

The price hikes are out of the control of the builders as the industry struggles to keep up with demand with Metricon’s rise being minimal, Queensland general manager Luke Fryer said.

Metricon Queensland general manager Luke Fryer, with developer Keith Johnson (right), says they are committed to fixed-price contracts and they absorb the price rises. Picture: Sue Graham

“With dwelling approvals for homes at record highs, it’s likely we will see additional pressure growing on constructions costs as demand continues to build for residential construction materials and resources,” Mr Fryer said.

“As an industry it is certainly going to be challenging.

“Whenever there is a big surge, there are some cost increases that we’re likely to incur and we are anticipating that.

“As Australia’s leading builder, Metricon have a strong supply chain and trade partner network, that puts us in a healthy position. To give our customers confidence, we commit to fixed-price contracts.”

HomeBuilder initially offered $25,000 to new Queensland homeowners who earned less than $200,000 with the house and land package coming in under $750,000.

The grant was slashed to $15,000 on January 1 and ends March 31.

More than 14,500 Queenslanders lodged new build applications for the federal government grant.

Master Builders deputy CEO Paul Bidwell says plumbing hardware prices have risen three times in the past three months. Picture: Tertius Pickard

It’s caused a run on plumbing hardware and roof trusses which have had significant price hikes since HomeBuilder commenced in June, said Master Builders Qld Deputy CEO Paul Bidwell.

Mr Bidwell said the increases had placed financial pressure on builders who were absorbing the costs which were rising monthly.

“There has been a 10 to 18 per cent increase in timber frames over the past six months and plumbing hardware has three price increases over the past three months of up to 10 per cent,” Mr Bidwell said.

“Builders are at the end of the supply chain and it is so widespread, there is nothing they can do.”

GM Homes Managing director Andrew Williams said they have absorbed all the price hikes which even included a wage increase for bricklayers.

Andrew Williams, managing director of GW Homes, says construction costs have risen up to three per cent in the past six months. Picture: Claudia Baxter

Not that he opposed a bricklayer wage rise as they “have not had one for six years”, but the timing coincided with the increases in the cost of materials, he said.

“Our major bricklayer has just increased their labour rate, but they have not one for six years so it was well and truly due and it’s not over the top either,” Mr Williams said.

“But from a builder’s point of view, we contract a house out in January and we may not get access to the site until June and in that time the costs have risen.”

He said builders with set prices absorb all increases for materials and labour but at the rate materials are rising, he envisaged up to a three per cent adjustment on new builds by the end of June.

“Across the board, for the last six months the cost of building a house has risen about two to three per cent and we’ve absorbed it until now,” he said.

“Up until June most builders will have to increase their prices to cover the increases, it won’t be huge but it will need to be done.”

Housing Industry Association Qld regional executive director Michael Roberts said a reduction in shipping because of the pandemic has created supply shortages. Picture: Supplied

Just this week, Mr Williams said aluminium window and laminex suppliers announced deliveries have had been pushed back, partly attributed to a reduction of imports because of the pandemic.

Housing Industry Association Qld regional executive director Michael Roberts said shipping delays were one of the driving forces behind the increases because it was creating a supply and demand shortfall.

“We have a shortage or delay in materials landing in the country because we still have a worldwide pandemic going on and that’s created all sorts of interruptions with transport and the delivery of materials,” he said.

Adding to the drama was the lack of available tradies who could not be recruited to Queensland from interstate because HomeBuilder had created a major labour shortage across the nation, Mr Roberts said.

“There is a defined pool of tradespeople to draw from and normally companies would draw them from interstate but every state is busy at the same time.”

Originally published as HomeBuilder’s success has a dark side with building prices set to increase