Brisbane builder Chris Munro bluntly sums up the challenge facing Queensland’s construction industry in the wake of the worst flooding in a decade.
- Builders have been hit hard by an increase in the price of materials while they work on fixed-price contracts
- Many describe the situation as a ‘profitless boom’
- Several large building firms have collapsed in the last six months but it also affects small businesses
“In 2011, we had a lot of trades and we didn’t have a material shortage,” he said.
“I think a lot of our finishing trades are going to go in there and help [with repairs], which is rightly so, but it’s just going to put a little bit more of a strong arm, or slow that industry down a little bit more.”
Mr Munro is the director of a business building one-off custom homes for clients – he says the demand for new builds has been healthy in recent years.
“It’s quite busy at the moment. Very busy to be honest, there’s a lot going on,” he said.
While he’s keeping up, he said everyone in the industry is aware of the challenges.
“There’s a lot of increases. It is a bit hard for us builders to swallow because we do have fixed-price contracts,” he said.
‘A profitless boom’
Mike Roberts from the Housing Industry Association said builders have been confronted with higher prices for big-ticket components like timber and steel.
“That’s created a fairly big challenge for the building industry but there’s been price rises across the board, every single item that goes into a house has increased in price,” he said.
Mr Roberts said people in the industry are referring to the current situation as a “profitless boom”.
“They’ve taken on a lot of additional work over the last 18 months, but they can’t complete the work as quickly as they normally can, so it’s meant cash through the door has been a lot slower,” he said.
“It’s not just the bigger guys, it’s right across the board — the majority of builders in Queensland are small mum-and-dad businesses.”
More building firms expected to collapse
Paul Bidwell at Master Builders Queensland said the price rises and the availability of other trades would likely keep posing a problem throughout this year and into next.
Several large building firms have collapsed in the last six months.
“Our concern is in the first six months of this year, there’ll be more builders to follow,” he said.
“We’re aware that some of the bigger builders, on average, might be losing five or ten thousand dollars for each of their homes. If they’ve got a big balance sheet then they’re able to wear that cost, but not forever.”
The huge impact of flooding in southern Queensland and northern New South Wales is likely to exacerbate the demand for labour and materials.
Locally, the industry’s already had a taste of how the impact flows on after weather disasters — after a freak hailstorm in October 2020 smashed hundreds of roofs in Springfield, west of Brisbane.
“We know that the cost of roofing went up significantly as a result,” Mr Bidwell said.
“Now we’re looking at flood-affected homes, which is much more than roofing, and exactly the same situation will play out.”
Flooded building materials put ‘in the skip bin’
Queensland-based building supplier Bretts has been operating for more than a century — selling everything from timber and steel frames down to minor fixtures.
One of its shopfronts in Albion, which sells smaller items like locks and bathroom fittings, was inundated with water in February.
“As builders are calling their orders up, we’re finding that, well, that stuff was put in the skip bin a couple of weeks ago,” the company’s Paul Bolton said.
“The warehouses are mostly in the western suburbs of Sydney and in Melbourne so there’s been freight issues the last couple of weeks obviously.”
Price hikes of up to 30 per cent
He’s estimating the flooded branch will take a few months to return stocks to a “reasonable level” — but even before the floods, prices were rising and delays were increasing.
“We can’t do anything about the price increases. If we didn’t pass on the price increases, companies like Bretts and the other timber and hardware merchants would go under — we just couldn’t afford it, the margins aren’t that great and we’ve got operating costs to cover,” he said.
“Everybody in the industry needs to be aware that doing a fixed-price contract is going to be difficult now.
“It’s not like five or 10 per cent, it’s like 30 per cent. It’s big hikes.”
Mr Bolton said a further 30 per cent hike for engineered wood products has been flagged for May.
“I have no clue what’s going to happen with pine framing. With what’s happening in Europe at the moment, who knows?” he said.
Builders left ‘high and dry’
They’re also having to break the news of delays to builders and subcontractors.
“Obviously, they hate it, because they’re on timelines with their jobs, people are wanting their homes built,” he said.
“We try to keep them abreast of the situation and give them advance warning, and ask them to give us as big a lead time as they can.
“It doesn’t always work out and some builders are left high and dry with really nowhere to turn.
“Especially at the peak of the pandemic, probably six or eight months ago, you could walk around hardware and timber yards around Brisbane and you just saw empty racks of timber. I mean, it was quite alarming.”
Builder Chris Munro has encouraged clients to keep the communication open with their builder.
“It’s not as simple as it was in yesteryear. It may take a little bit longer than normal but we will get through it,” he said.
“There is definitely a lot of work on, but it doesn’t necessarily mean everyone’s making more money.
“We’re definitely working harder for it, but that’s just the way it is — you do hear people say, ‘I’d love a holiday but there’s just too much work on’ — and you need to get through it because people are waiting.”