HomeBuilder time bomb: Warning boom could turn to bust

The HomeBuilder construction boom has created a "ticking time bomb" as surging costs of material and labour cuts profit margins in the building sector to the bone.

Master Builders Queensland deputy chief executive Paul Bidwell says the surge in new home projects sparked by HomeBuilder grants could send more builders to the wall as the price of everything from timber and pipes to plumbers and roofing contractors increases.

Bidwell's comments come after award-winning Brisbane builder PlanBuild collapsed earlier this week leaving 40 projects around the city unfinished.

He says the average cost of a $300,000 new home in south-east Queensland could increase by up to $30,000, which in many cases could not be passed onto customers by builders. Materials make up about 60 per cent of a building's costs with labour making up the rest.

"For some builders it is going to be a profitless boom because even though there is a lot of work out there, the margins are getting thinner," he says. "While we can live with a profitless boom, what we don't want is for builders to fall over. Builders are just going to have suck it up as there is no capacity to pass costs on." 

 

Master Builders Deputy CEO Paul Bidwell in Brisbane. Picture: Tertius Pickard
Master Builders Deputy CEO Paul Bidwell in Brisbane. Picture: Tertius Pickard

Bidwell adds that the best thing people could do was to give their builders more time to get projects completed rather than seeking damages for delays. "Every builder in Australia is in the same boat so there just has to be some flexibility," he says.

Liquidators were appointed to PlanBuild this week leaving at least 40 homeowners, some of whom had applied for HomeBuilder grants, in the lurch.

Building brokers and others in the industry say PlanBuild had engaged in aggressive price cutting in order to win business in an increasingly competitive market.

Subbies say it has become increasingly common for builders that are struggling financially to drop contract prices to get more money in the door.

Bidwell says HomeBuilder was not the only culprit in the dilemma facing the sector, with low interest rates, supply chain delays following COVID-19 and labour shortages due to storm damage exacerbating the situation.

"We are very concerned," says Bidwell. "We have a builder in Rockhampton who normally builds 75 homes a year but now has contracts for 300. But he can't get roofing trusses and other materials. Some hard lessons are going to be learned."

Queensland Public Works and Procurement Minister Mick de Brenni says the government has established a collaborative working group comprising peak industry bodies to help find solutions to the issue.

"This time last year the industry nationally was predicting a 'Covid-cliff' but Queensland now has the strongest housing construction market in the nation," says De Brenni. "Consumers and contractors are equally impacted by what is really a 'perfect storm' for the industry and I expect the working group to rapidly identify solutions, while the industry works to get back to its usual supply and operating rhythm."

One of the country's biggest building supply companies warned earlier this month of a coming insurance calamity as a shortage of tradespeople due to the housing boom leaves unfinished homes across south-east Queensland.

 

Boom to bust?
Boom to bust?

Brisbane-based Stoddart Group said the need to repair thousands of hail-damaged roofs following a massive storm last year in south-east Queensland has resulted in a shortage of trades people to install roofs on new homes across the region.

Stoddart Group director of corporate development Nick Cook said there was now a risk of homes not being handed over to families on schedule, due to roofing delays. The cost to install one roof has in some cases risen from $25,000 to $38,000.

MR SANDMAN

METALLICA Minerals boss Theo Psaros is a happy man after capping off a fund-raising effort to help bankroll the company's planned silica sands project in Far North Queensland. Metallica has raised $7m from a rights issue that closed this week, substantially more than the $4.9m initially planned. Psaros (illustrated) says the funds will help progress the company's Cape Flattery silica sand project, north of Cooktown. 

Metallica is joining the silica sands race amid a global supply crisis for the mineral used to make solar panels, mobile phones and televisions screens.

Psaros, a former Queensland rugby union boss, says that while silica sand is the most abundant mineral on the planet it is still a finite resource.

 

 

Cape Flattery
Cape Flattery

Metallica's project is adjacent to Mitsubishi's Cape Flattery operation, the world's largest single silica sand mine that has been producing since 1967.

Psaros, a former accountant with PricewaterhouseCoopers, told your diarist this week over a delicious beef cheek curry at Thai Jumbo restaurant that when he's not crunching the numbers on mining projects he loves nothing more than kicking back with some heavy metal from the band from which his company takes its name - Metallica.

We hear Metallica's Reload is on high rotation in the Psaros household much to the chagrin of his teenage children who like their music a little less ... well baby boomerish.

"But that's our band," Psaros exclaimed to his annoyed 16-year-old son after dad recently cranked up Reload on the car stereo recently.

 

Originally published as HomeBuilder time bomb: Warning boom could turn to bust