Construction Industry: 2022 Year in Review

Since the onset of COVID, the Australian construction industry has been hugely affected by supply chain disruptions, skilled labour shortages, skyrocketed costs of materials and logistics, and extreme weather events. As we approach the end of 2022, we reflect on the year that was and detail how these factors have impacted the industry.

1. Spike in housing demand

Thousands across Australia took advantage of the HomeBuilder Grant to renovate and build new homes. And disposable income and time spent at home have increased since COVID, which has spurred demand for home improvements, major renovations and new builds.

2. Natural disasters and world events

Natural disasters like fires and floods had detrimental effects on the industry. And significant events overseas, like prolonged lockdowns in Italy and New Zealand and what is happening in Russia, have affected our building supply shortages and fuel and shipping costs.  

3. Long lead times on materials

The industry has been impacted by the long lead times on materials, especially timber, such as trusses and floor frame systems. With some lead times spanning from 1-12 weeks and, in some cases, 4 months when sourcing timber for new builds, especially towards the end of 2021. The good news is that the lead times on timber have reduced significantly, but we still have a long way to go.

4. Construction delays 

In terms of construction timeline, we used to be able to sign a contract and start 2 weeks later with building approval. But today, you must allow a minimum of 3 months before starting construction. New builds that previously took 6-7 months are now taking 12 months to complete. The rise of interest rates has slowed demand somewhat, and we hope the construction industry will return to some normality as the demand and supply rebalance. 

5. Increased construction costs 

We’ve seen data from HIA saying that material costs have gone up 35-40 per cent. So not only timber was affected, but materials like roof cladding, electrical and copper as well. And appliances are in short supply at the moment, resulting in massive delivery delays.

People see the increased costs for new home builds and renovation quotes and think all the builders in the market are making huge profits. But in many cases, their bottom lines are hurting due to fixed price contracts, especially in the residential sector, where 99% of contracts are fixed. Many trade suppliers and subcontractors are not honouring the quoted price because they are paying higher product prices or have increased demand and supply issues. This is why many builders are referring to this time in the market as the profitless boom.

6. Building companies collapsing

Unfortunately, several building companies have been liquidated this year due to the abovementioned factors. We’ve seen it mostly with bigger companies because they're doing large volume builds, like 2,000+ homes a year, and looking at 12-24 month contracts where they've locked in a price with homeowners and subsequently have experienced price increases and delays. They usually have a lot of buying power but have been unsuccessful as they cannot sway pricing with their suppliers and subcontractors due to all the market forces. 

7. Trade shortages

Carpenters have been in hot demand thanks to the building boom and all of the insurance work with the floods in Queensland this year. But that has been the case with many other trades that go hand in hand with building or renovating homes. When materials are delayed, there was added pressure of postponing trades and lining them up with the new timeline.

These factors have made the building industry out of control this year. But it comes back to what we've always discussed: just be organised upfront. Have everything spec and selected that you can, and try to get all your variations, or at least foresee what changes you may make and then get them ready at the beginning of the job. So once you get into construction, you can put your head down, and the team can get into it and move forward. 

Bluebird Design + Build are Brisbane’s luxury custom home design and build specialists who work with you every step to design and build a home that looks excellent, matches your budget and meets your family's needs. Find out more about our team here or book a discovery call to see how we can help.