While Australia is experiencing a record-breaking housing boom, the demand for building materials has gone through the roof and builders are struggling to access the supply they need. A shortage of building materials such as timber, bricks, steel, and windows amongst other items has led to costly delays for renovations and new homes.
More homes than ever before are being built in Australia which has been spurred on by generous government stimulus incentives such as the HomeBuilder grant which proved to be more popular than anticipated. Many other countries also used construction as a stimulus and hence there has been global competition for materials.
The housing boom has also collided with a stressed global supply chain for basic materials, a worldwide shipping container shortage, a worldwide timber shortage, and all of this has been on the back of the black summer bushfires which lead to the destruction of softwood plantations. The demand for materials has been tenfold which has lead to supply issues and skyrocketing prices for basic materials up and down the supply chain.
Timber costs
Raw timber is in particularly short supply and builders are no longer being provided with estimated delivery dates due to suppliers not knowing when stock is arriving. Locally produced timber costs are up by between 20 - 25% this year alone, with more increases to come, according to various experts. The cost of framing timber is likely to go up to around $5 a linear metre by the end of the year, up from $3.75 in January.
Imported timber is even more expensive with prices soaring upwards by 90% and more. Part of the reason is that Australian lumber buyers are now competing for supply from Asian mills with American builders, who are in the grip of their own stimulus- and pandemic-inspired construction boom.
Unfortunately, builders are having to wait 16 weeks for laminated veneer lumber, which is a high-strength engineered wood product used for structures, up from around a 1½ week wait before the pandemic. Housing Industry Australia chief economist Tim Reardon said we can expect demand for timber to level out within the next six months.
The table below outlines the delay builders are currently facing on materials including a comparison to pre-pandemic timeframes.
Supply shortage & new builds
Tim Reardon stated that the commencement of new houses in the past 12 months was 20% higher than ever before. A recent HIA report says that Victoria has exceeded 40,000 new starts in a year for the first time.
The supply shortage and heavy increases in price points have not yet hit their peak, meaning the problem may only get worse before the situation improves. The cost to build is likely to increase by approximately $25,000 and build times are going to be heavily pushed out. The approximate time to get a building permit at the moment is 12 weeks, up from 8 weeks pre-pandemic, and then there is an additional few weeks to wait before builders can access the site. Those who are waiting for a build to begin are going to have to muster up as much patience as they've got as delays are going to be the new norm for the foreseeable future.
At PGA Advisory, we are doing everything we can to keep our clients up to date with the progress and status of their builds. While the current shortage of building materials is causing big delays and price increases, we are working hard to ensure our client's journey from beginning to end remain as seamless and smooth as possible. Thankfully, the situation is going to be leveling out at some point, and until then, we are here to answer all of your questions and assist you in any way that we can.
