Explosive supply and labour costs are forcing long delays and leaving builders out-of-pocket, as Australia’s property fervour drives insatiable demand.
The Association of Professional Builders (APB) says building companies are losing thousands of dollars due to extortionate price-hikes brought about by shortages and increasing demand in the construction industry, fueled by record-low interest rates and buyer ‘fear of missing out’.
What is the opinion of APB’s members’?
APB co-founder Russ Stephens said their members felt that the support they had given suppliers through the challenging times had not been reciprocated, leaving them in the lurch.
“The latest boom has spurred hundreds of additional projects and some builders feel their suppliers are taking unfair advantage of the situation. When supplies are low, charges go up, but not everyone feels the higher price tags are reasonable,” Mr Stephens said.
“As a result, costs are exceeding budgets by thousands of dollars. Meanwhile, a lack of availability is causing huge delays, meaning builders are struggling to stay on schedule.”
“The builder will have to bear the additional cost – eroding any net profit left in the project.”
“No business should be forced to press on with starting a project knowing they will be running at a loss, so we’re urging members to be cautious when signing fixed price contracts.”
“Consider inserting cost escalation clauses that will protect their businesses from the rapid inflation that we are experiencing in the construction industry.”
Tye Alroe, Director of Alroe Constructions, was recently let down by a subcontractor who pulled out of a job at the last minute. “I had a roofer locked in six weeks in advance.”
“On the morning of the job, he called and said he couldn’t do it – that something else had come up. Their decision to bail cost me $20,000 in one morning,” Mr Alroe said.
“The price increases at the moment are just out-of-control and it’s not just one material – it’s everything – meaning builders are hit at every turn.”
“There’s a lot of work coming at us but I’m being careful not to grow my business too fast. My focus is managing better clients, to make sure I can deliver the best possible service, while still making a margin.”
The Association of Professional Builders is providing their private clients with an advanced cash flow forecasting tool so they can predict future revenue with far more certainty.
Current advice is to revise these calculations on a weekly basis in order to factor in the rapidly changing costs of supplies and labour.
