The Profitless Boom

July 9, 2021

The Construction Industry has come out of the Covid19 Pandemic fairly unscathed. It has benefitted from being classed as an essential service that was able to work through lockdowns and has been boosted by government grants and incentives such as Jobkeeper and the Home Builder Grant.

It’s no wonder it has been a priority industry to support, Denita Wawn, the CEO of Master Builders Australia wrote “An EY modelling commissioned by Master Builders and published in 2020 estimated the economic benefits from potential stimulus to the construction industry. It concluded that for every $1 of Federal Government stimulus to the industry, gross domestic product (GDP) would increase by between $1.22 and $3.28 depending on how it was targeted.”

With all of this support, the industry is experiencing a boom both in the residential and commercial sectors. So why are so many industry leaders ringing the alarm bells?

Darryl Hood, Chair of Multi Span Australia said “the effects of skyrocketing price increases on materials, labour shortages and time delays have been unprecedented. But that’s still only scratching the surface of the challenges our industry is facing as we move into the second half of the year.”

·        Insurance costs increased upwards to nearly double due to a lack of competition in the global market.
·        Project Trust Accounts will be mandatory come January however, the impact of the costs are unknown as full details are not available in conjunction with the banking system.
·        There is a lack of availability of locally manufactured materials which has driven prices up.
·        The industry faces a shortage of suitably qualified staff and contractors.
·        The process for obtaining authority approvals is slowed down because of additional requirements and response times of the local authorities.
·        Funding approvals and valuations through financial markets and institutions have become more stringent with extra conditions to be fulfilled.

Businesses operating successfully in this market are in a unique position to forge ahead. Strong leadership and long term relationships with stakeholders are key to working together as we adapt to this exciting new environment.