Complete Home Extensions boss Mike Mellare says do due dilligence before building, prices unlikely to drop

An experienced construction boss is warning home builders prices won’t drop to pre-Covid levels, as a perfect storm of high prices for materials and plenty of work for tradesmen bogs the industry down.

An experienced construction boss is warning Gold Coasters planning their dream home to do due diligence to ensure their builder “is not about to go broke”.

And for those waiting for prices to drop before starting a build, he’s urging them to get in quick because it is likely costs will never return to pre-Covid levels.

“It’s not about fear mongering, it’s about a perfect storm of problems that are affecting the construction industry,” Mike Mellare, of Ormeau-based Complete Home Extensions said.

Mike Mellare, from Complete Home Extensions based in Ormeau

“Prices have gone through the roof, not just of raw materials but of every single thing relating to the building industry.

“Material costs have skyrocketed by at least 50 per cent, and more in some cases. Once prices go up, they never come down.”

Mr Mellare said a simple yet essential piece of timber used in every build had gone from a trade price of $2.07 plus GST in 2020 to $5.73 plus GST in November.

“A piece of 240x40m pine that was $13 a metre a year ago is now $18. When you’re buying thousands of them the extra cost adds up.”

Mr Mellare said as an established business, his company was financially sound and booked solid with jobs for the next nine months.

“We’ve been able to effectively manage the Covid storm, but there are lots of others struggling. A lot more are about to go out the back door.”

The cost of a new build on the Gold Coast was about 20-30 per cent more than in 2019.

A renovation that cost $167,000 in 2020 was now $220,000, solely because of soaring supplies.

Prices are going to continue to rise, thanks to a perfect storm of supply and demand, Mr Mellare said.

“And that’s just us trying to survive, not trying to make a lot of money,” Mr Mellare said. “It’s a means of survival, I’ve never seen anything like it in my lifetime.

“Mentally, it’s taking a toll, particularly as blokes, particularly those my age (70) don’t talk about mental health issues as much.”

Mr Mellare’s warning comes on the back of the collapse of Underwood-based building giant Privium in November.

The former Top 20 builder of detached homes in the country left about 160 unfinished homes in Queensland, with subbies reportedly owed more than $20m.

Another struggling major Queensland building giant tried to buy themselves out of signed house contracts, offering customers $15,000 for them to not build their homes because of the slim profit margin they would make.

One industry source told the Bulletin up to 150 customers were offered the deal, but only a handful accepted it.

Meanwhile, the building regulator is under fire for suspending the licences of 2640 contractors, most of whom are struggling small business owners.

The move took place in November and targeted small business owners for “failure to comply with minimum financial requirements”.

The majority had annual turnover of less than $800,000 and have been hard hit by significant pressures stemming from trade contractor and supply shortages.

By comparison, in the last financially year similar action was taken against just 66 operators.

HOT TIPS FOR NEGOTIATING CONTRACTS

Master Builders Queensland has urged members who have signed contracts to build homes to work with customers to discuss alternative time frames and contract variations.

The peak body fears the “extreme supply problems” facing builders and suppliers, and having a devastating impact on the progress of building works, will continue throughout 2022.

“A number of factors have come together to create a perfect storm,” MBQ told members.

“A sudden surge in demand created by the HomeBuilder grant, a spike in interstate migration, and relaxed mortgage lending criteria, all in an environment of continued low interest rates.” MBQ deputy chief executive officer Paul Bidwell said builders and suppliers were experiencing “unprecedented” supply issues across all building materials and trades.

“This is having a significant impact on the progress of building works as well as causing a massive spike in the cost of some materials and trades,” he said.

“Some timber deliveries are being delayed by 12 months and bricklayers, tilers, carpenters etc can be impossible to secure even at significantly higher rates.”

Master Builders Deputy CEO Paul Bidwell in Brisbane. Picture: Tertius Pickard

In addition, ongoing natural disaster insurance repair work continued to monopolise many trade contractors and unusually wet weather has led to a backlog of work.

Repeated lockdowns and international shipping delays also continues to disrupt building material supply chains.

“It is a very real problem across the industry with no sign of improvement,” said Mr Bidwell.

“While we are working hard on trying to find a solution, the reality is that delays and price hikes are unavoidable and will need to be factored into build times and contracts.

“Where contracts have already been signed, we urge contractors to work closely with their clients to discuss alternative time frames and contract variations.”

A MBQ survey also revealed the problem was reaching “critical levels”, with no expectation things would improve until well into 2022.

The Queensland Building and Construction Commission has recognised the problem and introduced the Accelerated Builder/Consumer Dispute Framework as a temporary independent mediation service to help builders and consumers find a way through the current challenges.

For details visit qbcc.qld.gov.au.

Follow @emilytoxward