Volume builders hoover up tight material supply, leaving smaller tradies in the cold

The government’s HomeBuilder grant has overheated an already bubbling residential construction market.

The tight supply of structural pine has triggered a spike in prices.

Boutique builder Phil Friscic had been a loyal customer to his timber supplier for almost two decades, spending “hundreds of thousands of dollars” on structural pine each year, but the Morrison government’s HomeBuilder grants have ended that relationship.

The timber supplier has told Mr Friscic, a director of Adelaide-based Oxygen Building Group, that he can no longer serve his small company, favouring larger volume builders instead.

Mr Friscic is not alone, with other smaller builders struggling to access key building materials as the HomeBuilder grants overheat an already hot residential construction market.

The government launched the $25,000 grants, later cut to $15,000, with Scott Morrison saying it would support more than 1.14 million jobs, including sole-trader builders, and shore up a COVID-rattled economy.

But the grants have had a perverse effect, with the people it was supposed to help keep in work now struggling to access essential items, delaying the scheduling of new jobs and, for those who can get their hands on structural pine and other products, facing price rises of as much as 60 per cent.

Instead, small and medium-sized tradesmen say the volume builders have been the main beneficiaries, with building material suppliers serving the bigger operators at the smaller ones’ expense. Volume builders, including Metricon, have even offered bonuses of up to $40,000 on top of the government grant to stimulate demand further.

“The concerning part about the whole scenario is that all these suppliers don’t care about small builders,” Mr Friscic said.

“It’s all going to guys that are mass production builders.”

Mr Friscic said he had been with his timber supplier for 18 years, “giving them all my business, spending hundreds of thousands of dollars a year and they said they can’t supply me any more”.

“They are supplying the three major builders in Adelaide and that’s it,” he said. “There are going to be so many small builders that are going to go under in the next year. It’s going to be crazy.”

Structural pine is used in almost all the key components of a building, from floor joists, to walls and roof trusses, and the tight supply has triggered a spike in prices.

Industry sources told The Australian the rise in timber and lumber prices in Australia had not been as accelerated as in the US, where lumber prices have skyrocketed more than 400 per cent, but since November local lumber costs were up at least 20 per cent and imported lumber up 60 per cent. Other sources say Australian structural pine processors are sending their product overseas to get a better price than serve the domestic market.

But it’s not just structural pine. Builders are also facing lengthy delays in alternative steel framing, with Mr Friscic saying he faced a 12-month wait.

Chris Mahony, of Geelong-based Meridean Builders, says he has been “snookered”. In one job he has sourced structural pine from the Illawarra region in NSW.

“We’re just praying that delivery comes through. If it doesn’t come through, obviously I can’t get it here anywhere, so I’d be pulling the pin on the job,” Mr Mahony said. “It’ll probably turn around at some stage, but instead of paying $2.80 or $3 for a lineal metre, you might be paying $7 or $8.”

Wesfarmers chief executive Rob Scott told the Macquarie Australia Conference this week that the company would resist passing on prices at its Bunning’s hardware chain, while acknowledging the supply chain constraints.

Josh Frydenberg said the HomeBuilder grants had “delivered the stimulus the housing sector needed” when he extended the program in November until the end of March.

“The sector is worth $100bn a year to the Australian economy or around 5 per cent of GDP and more than a million people are employed in the sector across Australia,” the Treasurer said.

“The success of this program has not only meant an increase in work on the ground to keep the pipeline of construction flowing but it has also protected jobs in the construction sector as well as across the economy.”

The program’s extension aimed to support the construction or major rebuild of about 15,000 homes, bringing it to a total of about 42,000 across Australia.

But according to the Australian Bureau of Statistics, monthly total dwelling approvals jumped to 23,176, or 47 per cent above levels recorded in March last year.

“More than 120,000 HomeBuilder applications have created huge pressure on the supply chain with Master Builders Australia’s survey of the industry showing that 70 per cent of builders are being hit by delays and cost increases,” Master Builders Australia CEO Denita Wawn said last month.