Victorians sell instead of renovating amid building crisis

Victorians are buying new homes instead of renovating, or putting plans on hold, as materials and trades shortages and skyrocketing prices consume the building industry.

The four-bedroom house at 222 Duff St, Cranbourne West, sold for $860,200 on May 20.

Victorians are buying new homes instead of renovating, or putting plans on hold, as materials and trades shortages and skyrocketing prices consume the building industry.

Melbourne property industry players report an increase in buyers looking for homes that require no additional work, as getting a tradie has “never been harder”— or pricier.

Increases in new builds and renovations have combined with supply disruptions and shortages to drive an “unprecedented” spike in construction costs, according to Herron Todd White.

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The four-bedroom house at 80 Frontier Ave, Aintree, sold for $750,000 on May 20.

Input prices to house construction rose 15.4 per cent in the year to March, due to ‘timber, board and joinery’ (up 20.6 per cent) and other metal products (up 16.2 per cent), according to the Australian Bureau of Statistics, which tracks this in its House Construction Inputs Index.

Housing Industry Association economist Thomas Devitt noted this 15.4 per cent increase was the biggest annual surge since 1980 — and it was up 18.7 per cent since pre-pandemic.

Reinforcing steel (43.5 per cent), steel products (42) per cent, steel beams and sections (41.5 per cent), and structural timber (39 per cent) increased even faster in the past year.

Advantage Property Consulting director Frank Valentic said there had been an increase in homeowners wanting to buy something in perfect condition and pausing renovation plans.

Getting a tradie has never been harder — or pricier.

“More of my buyers in the past would have been happy to buy something they could add some value to — the buyers don’t want to do that anymore, probably spooked by building costs and renovating costs, they’re now looking for more of those turnkey properties where you can move in, stick furniture in, and live there,” Mr Valentic said.

“Every time we try to get some tradies to do some work it’s really hard, it’s never been harder, and they all up their prices because they can.”

The Herron Todd White report states it is now “near impossible” for builders operating under a fixed price contract to make a profit” after huge surges in materials costs, “especially when considering the labour shortage”, which also meant builds were taking longer.

“Around 12 months ago, the average net profit on a job was around 4 per cent and build time was about six to seven months; now net profit is an average of around 2.5 per cent but the builds are taking around nine months,” Herron Todd White valuer Adrian Castle states.

The four-bedroom house at 5 Santarosa Ave, Tarneit, is on the market for $840,000-$870,000.

The three-bedroom house at 21 Penfold St, Craigieburn, is for sale for $610,000-$630,000.

Retail spending on hardware, building and garden supplies in March was 15.2 per cent higher than what would have been expected based on its pre-pandemic territory, Mr Devitt said.

Propertyology director Simon Pressley said materials shortages and price surges were a global issue influenced by the war in Ukraine and lockdowns and geopolitical tensions in China.

Ballarat builder Scott Baker told the Herald Sun last month the same house he built for a client 12 months ago was now being quoted for 20 per cent more — just because of materials.

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