NSW construction industry costs is bad news for home builders, renovators

Bad news for home builders and renovators: A lack of tradesman and continually creeping costs are keeping prices of building skyrocketing.

Labour shortfalls and ongoing high construction costs will stifle homebuilding over the next year, Brian Seidler, the executive director of the Master Builders Association of NSW, warned. Picture: iStock

Home builders and renovators hoping for some hip-pocket relief are unlikely to get any in the coming months, with industry figures warning a lack of tradesman and continually creeping costs will keep the price of building sky-high.

While the cost of construction materials slowed across the first three months of the year, they still crept up by 0.8 per cent in NSW, while a lack of qualified tradies continues to bite across the sector.

It comes the same week that Australian Bureau of Statistics figures revealed the number of new home approvals across the country were down in March by 17.3 per cent compared to a year earlier.

CoreLogic’s Cordell Construction Cost Index, which is released quarterly and is based upon the cost of building the average new home, showed price growth of 0.8 per cent for building supplies, down on last year’s rapid growth of 11.9 per cent recorded over 2022.

Brian Seidler, the executive director of the Master Builders Association of NSW, warned labour shortfalls and ongoing high construction costs would stifle homebuilding over the next year.

Mark Cook, the director of M2 Carpentry in Randwick, says a lack of qualified tradesman and escalating supply costs are hobbling building. Mark (right) pictured with workers, from left, Kieren Warner and apprentices Jonny McManus and Ben Mitchell at a job site in Kensington. Picture: Jonathan Ng

“In simple terms, we don’t have enough trades people and builders to build what is required,” he said.

“That is reflected in the cost of labour.

Building material supply has improved. Costs have not.

“We certainly have seen a better supply of materials – but what we haven’t seen is a decrease in cost of materials. We’ve seen plateauing, but not decreases.”

“The real issue we see for the future is construction is going to be the cost of labour.”

CoreLogic construction cost estimation manager John Bennett said tighter margins for builders meant less homes would be built.

“In short, the increase in construction costs across NSW and more broadly Australia, is likely to impede home building. An increase in the construction cost overall has two major impacts,” he said.

“The first is the cost it will have on consumers and the second is the reduction in profit margins for builders, which will impact the industry.”

“Reduced or tighter margins will make it harder for an industry that’s already under significant stress but the biggest impact to the supply of homes is the number of trades and labour available. There are only so many houses that can be built with the resources that are available.”

Mark Cook, the director of Randwick-based M2 Carpentry, said labour shortages and the continuing growth in construction costs was challenging small businesses like his.

“In terms of timber, the prices went through the roof – they have come back down a bit and levelled off which has helped us out,” he said.

“I think a lot of other products have gone up – plaster board, fixings, glues, it’s still going up, which increases the cost of building.”

“Then there’s labour shortages – it’s so hard to get decent tradesman.

“At the beginning of last year I took on two new apprentices – which was good for me because the government had a lot of incentives, so luckily I got two good guys and we’ve been able to train them up.”

“We’ve had to adjust our pricing to suit which increases the cost of the build for the client. With labour shortages I can’t take on too much, I have to adjust what I do.”