BUILDING approvals have plummeted by more than 25 per cent in Sunraysia over the past year as a crippling combination of rising costs and labour shortages continue to weigh heavily on the construction industry.
Latest data from the Australian Bureau of Statistics shows that new building activity in regional Australia has slowed at the same time as interest rates have steadily increased and the cost of materials has continued to rise.
Approvals of new dwellings fell in both the Mildura and Wentworth local government areas since the initial “sugar hit” of the Federal Government’s COVID-19 home-building stimulus grants in 2020.
In the 2020/21 financial year, there were approvals for 411 new dwellings in Mildura and 89 in Wentworth.
However, this dropped significantly in the 2021/22 financial year to 301 for Mildura and 40 in Wentworth.
Local builders are still reporting a rise in the cost of materials as they expect new home construction to slow even further in 2023.
One Mildura builder went as far to blame the government’s grants at the start of the pandemic for creating the difficulties the industry finds itself in now.
“That initial sugar hit is what’s caused the problem. They did these grants where contracts had to be signed by the end of December 2020 to be eligible for the grant,” Brad Hards, of Hards Homes, said this week.
“A lot of builders were signing up customers to whatever scale they build at, but they weren’t able to start those projects because of the shortages and delays with materials.
“So, what the builder quoted in 2020 was much different a year later because of the rising costs.
“You can’t put a 30 per cent margin on a quote because you wouldn’t have got anything built.”
The latest Cordell Construction Cost Index shows the cost of building materials rose by 11.9 per cent in the year to December 2022.
However, Mr Hards and prominent local developer Larry Dimasi say the hit to builders’ hip pockets has been twice that figure since the start of the pandemic.
“It’s definitely gone up at least 25 per cent over the past two years,” Mr Hards said.
“Timber, steel, concrete, gyprock and insulation are the main items that have gone up significantly. Insulation has probably jumped up the most over the past year. It’s up about 30 per cent.”
Dolfen Developments boss Larry Dimasi said the overall rising cost of materials since 2020 was “at least 20 per cent”.
“Air-conditioners is a big one, as well as the cost of bricks and concrete,” said Mr Dimasi, whose Mildura South stage 1 and 2 developments (110 lots) have sold out.
“The material and labour costs for electricians has also gone up by about 15 per cent.”
Both Mr Hards and Mr Dimasi shot down the belief from some that builders and developers were price gouging during the pandemic.
“It’s been such a volatile environment over the past 18 months, and the stigma that builders make a lot of money is just not the case,” said Mr Hards, who builds an average of 10 homes a year.
“We’re not trying to rip people off. We’re simply trying to cover our costs.”
Mr Dimasi said land in Sunraysia was also becoming “very expensive”.
“There’s just not enough of it to meet the supply and demand locally,” he said.
“For example, the price of my land has gone up 25-30 per cent in the past 12 months.
“That’s got to do with rising costs of authorities’ fees.
“I’m certainly not making an extra 25 per cent.”
The decline in new home building starts in Sunraysia has been reflected elsewhere as it plummeted nationally by more than 20 per cent in the past 12 months.
Mr Dimasi said all the price pressures meant the cost of building a house in Sunraysia has gone up between 15-25 per cent since 2020.
“The next 6-12 months is going to be challenging for the construction industry,” he said.
Mr Hards said the future for some builders was uncertain.
“I’m going OK, but there are definitely builders looking at getting out of the industry,” he said.
“Putting your heart and soul into it and not making any money is just not worth it.”
