Hi, hoping to get some advice on what the average increase in building cost is over the past 2 years? We went to a few builders just before the pandemic, got some quotes, and due to job uncertainty we haven't progressed further. We are now in a better position to proceed but wondering how much the price has gone up when compared to end of 2019? I spoke to one of the builders (in Vic) and he said he's booked out for 18 months even if I have a planning permit now (which I don't) and that the price has gone up by 20% which is a fair bit. Wondering if people could please share what their experience is building in the era of hyperinflation, labour shortage and supply chain interruption.
Building Price Going UP?!
oztite on 16/01/2022 - 21:05
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Id suggest OP listen the the (builder) expert which they have already consulted
As the builder pointed out to OP….Its not the higher cost that is the issue
Its getting somewhere in line to get your build doneAdd another 12 months and another 20% perhaps on top of the already 20% increase in costs
Because its not about building cost any more - thats a given
Builders will build where they make the most money
If they are so busy expect a huge premium to buy their time and hopefully their commitment
In addition to price increase and time you need to also be aware of the number of builders going bankrupt due to the "hyperinflation, labour shortage and supply chain interruption."
Don't know that builders are going broke right now as clauses in the contract allow them to make "adjustments" in costs and "extensions" in time
Its only when the property market collapses and they cant sell at a price high enough to recoup their costs…that's when they go broke
Then why have so many gone bust in the last 4 months around OZ?
It would be builders who have fixed price contracts. They are stuck with the fixed income, but their expenses such as subbies and materials would have gone up and they can't claw it back at all.
I think it will be somewhere between +1% to +60% in cost.
Average falling something in-line with the raise in property prices for that area.…that is, without considering other factors like supply issues and staff shortages, all which exponentially balloon prices to the end consumers.
I think it will be somewhere between +1% to +60% in cost.
I hope this is a joke.
A $300k piece of land. $300k two story standard house for house and land package now up 60%, $480k. Total $780k.
House prices up 22% in the last year. $600k established house on piece of land now worth $720k.
If you build a new house and land package you basically have negative equity and the bank will ask you to stump up $60k that you don't have.
Think the arithmetic needs a bit of rework.
Materials can be mitigated by choosing what is in stock and reasonable priced items.
Shortage of labor is a very funny question. No net immigrants so it is basically people in Australia building new or renovating. Theory is there is no additional demand with existing supply. Considering a lot of construction sites are pretty much in the open until lock up stage then I assume people aren't getting sick on site rather risky behavior off work site.
I find it hilarious that anywhere between 1/3 to 1/2 of truck drives are off sick due to COVID. Usually they drive on their own in the cab and unless they are getting intimate at truck stops or at pick up / delivery they must be doing some risky stuff outside of work. 1/3 to 1/2 of your work force undertaking risky behavior. I guess 2 years of pandemic awareness communications came to nothing.
I think tradies are just talking it up. Shortage of materials maybe, because we depend on other countries and shipping. Shortage of labour highly unlikely if you look at the amount of tradies (real or fake) that came out to demonstrate in Victoria against CFMEU and state government.
Wether they're talking it up or not is irrelevant to the consumer.
There's still a shortage, and demand has risen, especially with inflation to fiat currencies all around the world. That's why the property bubble didn't burst with covid, it got even larger and isn't stopping.There are supply issues too. Wether its from less transport of those goods from overseas, or interstate. Or maybe its supply issues at the raw material stage, with other countries hit with covid issues.
So best case scenario: you pay same rates as 2019.
Optimistically: you pay only increase in local property prices.
Pessimistically: you pay at the increase of theoretical inflation.
Worst case: you stack the cost of inflation, property prices, plus extra for the supply and labour shortages.
…whoops, forgot to mention, you might not even get a service!inflation to fiat currencies all around the world
This is a bit of a lie. The FED's balance sheet has gone up 9x. Inflation is not anywhere near 9x. Most of the inflation is used cars, the last set of US inflation numbers.
There's still a shortage, and demand has risen
There might be a shortage (due to supply chain but the sun isn't shining less causing trees to grow slower neither has some higher power make iron ore disappear into the ground) but demand hasn't risen. Soon you'll be telling me no one died from COVID19, it is all just a lie.
People might be buying more but it will all stop. How much stuff can you stuff from Bunnings into your house before you over capitalise and start having to rip it back out.
At best this is like government subsidies for asset write offs for tradies. Pushing forward all the future purchasing to now. It is all going to go bust.
Like I said before. Either builders are going to go bust because materials and labour prices go up or property owners are going bankrupt because they caved and ended up in negative equity with a valuation not reflective of what they paid the builder and can't pay the difference.
"Materials can be mitigated by choosing what is in stock and reasonable priced items."
You must be kidding
Stock and material shortages everywhere
Labor shortages everywhereReasonable priced items - just forget that
Its a case of getting your hands on whats available at the going priceStock and material shortages everywhere
Walk into Bunnings. It isn't rows and rows of empty shelves.
Labor shortages everywhere
Really? Or is it just people taking the mickey? COVID is just an excuse to pull sickies. How can truck drivers that drive on their own in a cabin have 50% COVID infection rates. Unless they are getting intimate at truck stops, pick ups and drop offs.
and that the price has gone up by 20% which is a fair bit.
20-40% depending on your build etc. All trades are in huge demand, so are charging the earth, so the builder has to pass it on.
All trades are in huge demand, so are charging the earth, so the builder has to pass it on.
These guys are just feathering each other's nests. Basically both builder and tradies stand to benefit.
Not sure how these guys are going to work it out when there is suppose to be a housing crash in 2023 yet build prices are going up 20% - 40% as people are saying. Will be a big crunch and people ending up with negative equity.
Not sure where you got your figures from. I don't think it will pan out as you think.
Whilst, I would hope that our dollar crashes (a bit), and property prices, and businesses. So that we destroy something good, in order to create something great. Like exercising your muscles, or periodic burning forest deadwood. The hope is that these "big swings" will cause bad businesses to default and keep the market healthier. Well, that doesn't work. The ethical businesses seem to be the ones barely keeping afloat, whilst the truly bad businesses play the game, have moved their eggs and (sometimes immorally) adapted/fled before the storm. Or they fail and get bailouts.
After it's all said and done, who truly pays the price for this are the working class and the next generation. It's not the top 5% of people. That's the playbook Americans generated from the mid-70s onward, and other countries internationally have foolishly copied them. Actual wealth creation comes from either selling Natural Resources, or by developing New Technologies to license to other states. Australia is somewhat competent at that task, and we have lots of Natural Resources… so we should bounce back quicker from this pandemic than almost every other nation. However, I still need to stress that a theoretical win for Australia's economy, is not actually a practical win for Aussies. The gap between the wealthy and middle-class will continue to stretch.
Not sure where you got your figures from. I don't think it will pan out as you think.
Whilst, I would hope that our dollar crashes (a bit), and property prices, and businesses.
Don't think it will pan out as you think. Crashing dollar usually makes our assets cheaper for foreigners to buy. So houses prices will go up for us but stay the same for foreign investors. Foreign take overs of our businesses will also increase as they become cheaper.
So that we destroy something good, in order to create something great.
You sound like the Liberal election campaign that got rid of KRudd.
You sound like the Liberal election campaign that got rid of KRudd.
You give me too much credit, I'm not as intelligent as these pollies :\
"crash"
nekminnut, puts on another 20%
The housing crash has been predicted for decades now. Even when the yanks had an actual housing crash we didn't have one. I predict that we'll be predicting housing crashes for long to come.
There's no oversupply, it's unlikely a massive economic collapse is on the horizon and people in Australia tend to give up on their home loan as a last resort. Even if they do, there's a chance an investor will simply buy it and rent it back out, people need somewhere to live. Best hope is that housing becomes a poor investment as interest rates go up. But rents will also go up, balancing that somewhat.
Anytime I see someone talk about a massive correction, they leave out the mechanism with which it'll happen and ignore basic supply/demand. Unless people stop being able to afford housing, why would it come down?
Unless people stop being able to afford housing, why would it come down?
"I have a feeling (or think) a big crash is coming soon." is the most common reasoning for markets not to crash.
but we haven't had what I would call a major crash for years and I think we're over due for a big crash,
https://www.ozbargain.com.au/comment/11637785/redirThe market doesn't care what people think or feel. It will do what it wants when it wants. It will do the opposite when people are at the extreme emotionally.
@rektrading: The number of people waiting around for a big crash makes me think it’ll never come. The second prices drop 5% a million people will dive in unless there’s massive lending restrictions put in place
These guys are just feathering each other's nests. Basically both builder and tradies stand to benefit.
Oh for sure they are…. Tradies are turning into the most overpaid field out there!
Not sure how these guys are going to work it out when there is suppose to be a housing crash in 2023 yet build prices are going up 20% - 40% as people are saying. Will be a big crunch and people ending up with negative equity.
Like all businesses they'll milk it to death while they can, but when the big tank comes, they'll just have to drop prices.
The longer you wait the more it will be
having said that I'd be holding back handing over large deposits seeing how another large building company went tits up last week -
Hotondo Homes Tassie
https://www.abc.net.au/news/2022-01-13/hotondo-homes-goes-in….What quotes have you had out of interest..
Well shit. Not only do I have to spend 3 bazillion dollars to buy a house but now I need another 15 bazillion dollars to build a first floor extension.
Sigh
When we did it 10 odd yrs ago, was <90k…. how times have changed.
House prices expected to fall in 2023 due to higher interest rates.
Cost to build going up 20%+
Falling house prices and increasing build costs coming up to meet that. Perfect storm. Builders going bust, as well has home owners. So what is the truth?
I heard real estate prices are expected to go up in 2023.
Sauces: CT is laundering out and buying hard assets to prepare for a bear market.
After a 22% rise in Australian home prices this year, they are expected to slow to 5% growth in 2022 with prices likely to fall 5-10% in 2023.'
You hear the FED goes Brrrrr but we don't see hyper inflation. So don't believe everything you hear without referencing a credible source.
We had to eat 🦞 because the price of 🦃 went parabolic.
https://external-preview.redd.it/1C6jkRGYdubLlrlmvBLQwP13GDT…
@rektrading: i.e. buy camper van company stocks because people will be buying camper vans instead of houses!
Still a long way to go before it becomes anywhere near affordable again it seems.
I heard it was going to be flat
done we covered all options
House prices expected to fall in 2023
Its been going to fall since 1980…
Stop it.
Price predictions are like buttholes. Everyone has one but nobody gets it right.
Banks cant afford for it to crash, so it will eternally be manipulated…
Price predictions are like buttholes. Everyone has one but nobody gets it right.
What is a right butthole? You a plastic surgeon in pursuit of perfect butthole symmetry?
You know what the original quote you are trying to paraphrase not quite correctly: opinions are like buttholes, everyone's got one.
If you put expected falling house prices and increase in cost to build it can both be right. There is no way that everyone who even starts a renovation is going to end up in negative equity.
But can house prices go up another 10% year on year. At what point would the bottom fall out when less and less people can afford it and there is just a few record breaking transactions supporting the market?
Compare to 2018 - 2022 will have Seen a 50,% minimum increase since then
That seems high - the increase in build price alone would substantially push up house price then, excluding any land price increase due to demand/ inflation. How is house price ever going to fall in 2022/2023 as predicted?
The minimum increase in crappy Bunnings timber has increased by 37% alone… Add it up along with other infrastructure increases…
source?
Base price of the home we are building has gone up 17% since Q3 2020.
Thanks - could you please elaborate a bit more on this? Do you mean it has gone up as you build, or you have been told it's now 17% higher compared to 18 months ago to build the same thing?
We signed a fixed price contract so no change in our build cost thankfully. If we were to sign now the base price would be 17% higher. On top of that all the upgrades have increased as well.
I see, thanks for sharing. Do you know if the upgrades have gone up more or less than 17%?
@oztite: It depends on what the item is but overall about the same. Downlights, for example, were $99 each now $117. I think discounts are starting to return though as buyers dry up. Our builder didn’t offer any incentives up until recently but that’s changing now.
Impact of covid too
Here in SA could get a budget 4 bedroom for 230k including footings from the major companies 2 years ago, all the companies have put the prices up about 10%, so looking at another 25k. Realistically looking at 300-350k for a decent 4 bedroom with some upgrades.Just had a look back through my emails, framing pine has gone up 37.5% last year.
Material prices are up due to covid supply chain issues
Labor prices are up due to government incentives (home builder) and low interest rates
So just like REA property prices…….who knows what it'll be in 2 years, that will all depend on Covid and Government / Banks continuing the big ponzi scheme
So it seems its pretty much like new and used cars at the moment. Supply is terrible, Demand is high = ridiculous prices
Every comment in this thread is anecdotal. Here is some facts to bring everyone's 60% increase bullshit back to earth
https://www.corelogic.com.au/news/national-housing-construct….
I've been talking with a lot of people who have just finished their build or are in the process of renovating and it's currently going up and up in price. There's a shortage of tradies and a lot of delays but interest rates are low and people can't travel and some are pouring that money into their property but a lot of balking at the high prices of work.
I think it'll depend on whether people getting this work done (demand) continues and if shortages continue and what happes with interest rates. There's also word of a glut of supply, but I don't think that's to do with construction material.
I think it's too volatile to predict with any accuracy.
Normal. 20-25% vs 2 years ago. We have sites running that we signed to build 2 years ago. A similar contract now will be 30% more according to my builder. Supply chains are wrecked by Covid. Trades has been calling in sick with covid too and delaying the builds even further. A builder will have to take these things into account when signing up a new client so expect much longer contract terms too.
Just be careful when you choose builders. A lot has gone under and more will go under this year. Cheapest doesn't mean the best. If you need builder recommendations, I can throw a couple of names your way.
Trades has been calling in sick with covid too
More now because another excuse for pulling a sickie.
Supply chains are wrecked by Covid
Depends. If you want something custom then you are stuffed. If you want bog standard then plenty of stock. It is like buying a fully optioned and customer RAV4 Hybrid Cruiser will be 10 month wait. You get the base model that the fleet buyers get they'll find you one on the spot. Depends really on whether you want to live in a house sooner.
If you are knocking down just wait a little longer keep saving. I think tis risky times too build with shortage of materials and labour due to covid.
Structural timber is still hard to find. Ive noticed all the new builds and extensions around my area are using steel now. That will add to the cost of a build.
Timber is up 100%. Would be stupid not to use steel considering pre-COVID it was only about 20% more. The benefits include no termites, it doesn't warp so you don't need a carpenter to go around to fix it so the walls would be straight and no shrinking over time causing cracks. Also better able to span large areas without having to get engineered steel to hold up roof / upper floors.
Why it is so widely used is because people want the cheapest price and timber is the cheapest so there you go!
Structural timber
Wouldn't call it that. It is just treated pine that gets slapped together for strength. The magic is in the maths (engineering) rather than the product itself.
Why don't you just go and shop around and see for yourself.
It's such a vague and general question that will not actually assist in any productive way.
Don't forget forward inflation.
Due to demand, it may be 12 months or more before job commences
The contract value they sign you up to today they have to honour in at least 6 months, maybe 12 months' time when work commences
So, prices have gone up in the last 2 years plus the estimated price increase for future
On that basis with various details above I would peg it at least 25% higher than what you were looking at in 2019
Pro tip - don't just shop on price, especially if this is your long term homeDon't forget forward inflation.
Also FOMO.
Chart of lumber price, people signing contracts today might get caught out with higher prices. The link to lumber price you can see prices go up and down
In 12 months if supply chain gets worked out and more automation goes into materials production then the property owner goes bankrupt paying inflated price. The market always responds to supply and demand.
It is like the 1970s oil shock, people got higher prices initially then car manufacturers responded with more fuel efficient cars. Same thing will happen. Contract prices might be fixed but how good is the builder at predicting prices when even economists get it wrong.
I’d be surprised if we don’t see 10% increase minimum this year