Prices of building materials continue to rise across Tasmania as profits fall

It is costing builders more to source the materials needed to construct a house but fixed contracts mean profit margins for builders are being eaten away or swallowed up completely.

THE vice continues to tighten on Tasmania’s home construction industry as suppliers of building materials hike up prices, leaving profit margins either eaten away or swallowed up completely.

The State’s builders say they are getting emails almost weekly advising of material price rises and supply delays.

One major supplier this week alerted its customers prices would rise up to 30 per cent on a range of items from timber and steel to doors and insulation.

Lintels, fence posts and other steel products will jump by a third, it said, and because of the volatile conditions, prices would be reviewed monthly.

“Prices used to be locked in for six to 12 months but now they change daily,” Paul Burnell from Ronald Young and Co. builders said.

“It can take six months from quoting on a build and starting construction.

Building site

“Reputable builders honour their quotes but the price increases can add 10 per cent to the $350,000 cost of constructing a three, bedroom, two bathroom home, that’s $35,000 which is borne by the building company.”

“We heard from our glazier the other night that prices were going up. As an industry, we will need to work the price escalations into our margins but with locked-in contracts the builder is bearing the cost.

“Margins are being squeezed or eroded completely in some cases. Sooner or later there has to be a correction.”

Supply issues, transport issues, a worldwide shipper container shortage and higher fuel prices are all contributing to the rise.

Big volume builders with many long-term lock-in contracts are under so much pressure some are folding - such as Hotondo Homes in Hobart which entered receivership last month leaving as many as 80 contractors and 40 customers in limbo.

Other Hotondo Home franchises in Tasmania remain unaffected.

HIA Tasmania executive Stuart Collins said it was a challenging time for the building industry with costs to local builders increasing by seven per cent across the board in 2021.

“We were hoping it would ease before now but we now expect there is more pain before things correct themselves,” Mr Collins said.

“On a positive note, we are building a record number of homes and most members are aware of the situation and are working the volatility into their margins,” Mr Collins said.

Master Builders Association CEO Matthew Pollock. Picture : Mireille Merlet

Master Builders Tasmania CEO Matthew Pollock said margins were being queezed across both residential and commercial construction.

“Suppliers need time to build back their inventories and we just have to wait for that,” he said.

“Prices have jumped across many sectors but building materials have been a stand out. At the same time, construction has been helping rebuild the economy.”

Some of the price rises being quoted to builders, March 1, 2022:

• Reinforcing Mesh 7%;
• Deformed Bar 13-20%;
• Pine Framing 10%;
• Structural Treated Pine 15%
• All other Treated Pine 10%;
• Insulation 10-20%;
• Doors 15%,
• Plywood and imported product up to 30%
• Lintels, Fence posts and other steel products up to 30%

April 1:

• Austral Bricks 5% plus cartage increases;
• James Hardie Cladding and Accessories 6-20%