Construction price rises, what does it mean for the consumer
Since 2019, Covid-19 has severely impacted the construction industry. From the outside builders and subcontractors are extremely busy, which may give the impression that they are making large amounts profit. Unfortunately this is not always the case. With 15-50% rate rises on supplies and delayed in material, News.com.au has reported that many builder companies are absorbing the expenses, due to fixed priced contracts. The absorption of such high percentages has caused a number of large Australian building companies to go into liquation, with a prediction that many more will follow.
How does this affect the consumer? The continual price increase in material cost and lengthy delays for delivery of materials will increase the overall price of a build. The delay in material should also be considered with regards to build time and budgeting for accommodation.
Should the client delay their build? Russ Stephens, co-founder of the Association of Professional Builders (News.com.au) warned that Aussies shouldn’t delay building their dream home as costs aren’t going to go down in a year’s time. Rather he recommends consumers budget for the prices increase and work with a reputable builder, rather then choosing a low cost builder who is working off large number of clients with low profit margin.
“Builders who are producing the lowest quotes are going to be the first to go. Right now, it’s a time for research and making educated decisions.”
Allen Brothers Construction (ABC) allocates a large amount of time to proposals, this ensures clients are given a accurate bill of quantities, rather then a ball-park-figure. By taking the time to price accurately , the clients are given a transparent reflection of what their build cost will be. Allen Brothers Construction has never aimed to be the cheapest builder, as the lowest price normally means the builder has made allowances instead of accurately estimating the cost. Although other builders initial quote looks attractive to the client, the overall build cost will usually increase throughout the job which can cause the client to be unsatisfied with their builder. ABC has a view of quality over quantity. By keeping client intake to a manageable amount, ABC is able to ensure their clients build runs smoothly and quality is not sacrificed.
Mr Stephens, who has been in the building industry for 16 years, said it’s not fair that a builder should be responsible for rising costs that are out of their control.
He has suggested that cost escalation clauses need to be used more commonly in building contracts, although he acknowledged that would mean extra pressure on consumers as they would be slugged with the rising prices.
“If you do go looking for the lowest quote, that’s just gambling – you are really taking a punt that the builder is going to be around to finish the home and the odds are stacked against you,” said Mr Stephens News.com.au.