Price blowouts continue for builders

By Nick Sinis

LOCAL builders continue to feel the impacts of price rises with some product lines increasing by nearly 50 per cent compared to a year ago.

This comes as supply chain constraints and the lack of flexibility in fixed-price contracts continue to bite. 

Master Builders Victoria CEO Rebecca Casson said many builders are struggling with the ongoing impacts of fixed price contracts with no ability to pass on increases to consumers through cost escalation or rise and fall clauses.

If Victorian builders cannot pass increases onto clients, there is a risk of insolvency, and clients might end up with half-finished homes, Ms Casson warned.

The Sentinel-Times spoke with local construction company TS Constructions, who spoke about the challenges they’ve continued to face in recent years. 

“We were fortune that the building industry was allowed to keep operating during lockdowns, but the big hurdle was when they introduced site restrictions,” director Trevor Bowler said. 

“Everyone basically lost four weeks and that put everyone well and truly behind and it has taken in some jobs until now to catch up.”

Mr Bowler said they’ve been advised of price increases from almost a dozen companies recently. 

“This ranges from concrete to insulation, some of those price rises are up to 18 per cent,” he said.

“What we’re finding is the suppliers in a lot of cases are trying to lock it in, and not being able to have any flexibility with contracts makes it difficult.”

Mr Bowler added he was supportive of reforms to help ease the burden of fixed contracts.

“There is an element of risk (for contracts) but now the risk is far greater,” he said.

“We’ve just got to have contingency (costs) in there that hopefully covers these unforeseen price rises.” 

The company has recently completed a number of large projects including Newhaven College’s new arts precinct.

“We’re fortunate that we wrapped those (projects) up and tendered a couple of other large projects,” he said.

“But we still have plenty of other jobs at the moment.”

Mr Bowler highlighted material shortages were also having a huge impact on operations, especially for imported products.

“Even in Melbourne for specialist doors and mirrors, pre-COVID for a commercial job if we needed 100 doors, we could get them in a month.

“Now it is at six months.”

The Australian Bureau of Statistics recently revealed the latest price increases for construction materials for the June quarter of 2022, further highlighting Victorian builders’ cost pressures. 

MBV analysis of ABS data in the last three years has revealed that steel products have risen by 54.2 per cent, electrical equipment by 39.4 per cent, and timber, boards and joinery by 37.8 per cent.

Ms Casson feared that some building and construction businesses would exit the industry because market conditions and contract constraints were too demanding.

“That’s why MBV has continued to advocate to the Victorian Government to include rise and fall clauses in domestic building contracts,” Ms Casson said.

“This has been implemented in Western Australia, South Australia, and Ireland for commercial contracts.”

In the meantime, Ms Casson said MBV encouraged open communication between builders and clients to avoid any building issues or delays.