Finance Property HomeBuilder grants blamed for costly construction bottleneck

HomeBuilder grants blamed for costly construction bottleneck

HomeBuilder has forced the costs of labour and materials to soar. Photo: Getty
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The cost of building a home is set to rise, with the Housing Industry Association’s chief economist expecting the squeeze on Australia’s construction industry to last well into next year.

Tim Reardon has told AAP a shortage of labour and materials has pushed costs higher, while the time to complete a stand-alone dwelling has blown out from six to nine months to about a year.

“It will be well into 2022 before the industry starts to return to more normal conditions,” he said.

Timber, steel, PVC pipes, fittings, electrical equipment and tiles are all in short supply thanks to factors including global shortage of shipping containers, and domestic production of structural timber nearing capacity.

A record 146,000 new detached Australian homes were set to be built in 2021, a 20 per cent increase on previous figures, Mr Reardon said.

The surge in demand has been spurred by the federal government’s HomeBuilder scheme, which gave applicants up to 18 months after the signing of contracts to begin construction.

More than 120,000 building projects were eligible for the HomeBuilder grant before the program ended in April.

“Everybody knew it was going to drive a building boom,” Tim Lawless from Corelogic told AAP.

Mr Lawless agreed the industry will see an extended shortage of materials and trades, which will flow through to higher costs for new homes and renovations.

The CoreLogic CHIP Index, which measures the relative cost of building stand-alone houses, shows construction costs have risen 1.4 per cent in the three months to June, making an annual increase of about four per cent.

But the rush to secure project approvals appears to have abated now that the HomeBuilder deadline has passed.

ABS seasonally adjusted figures show monthly dwelling approvals were down 6.7 per cent in June, after highs of 19.1 per cent in February and 16 per cent in March.

New home sales tumbled 20.5 per cent in July compared to a month earlier, with declines experienced in almost all major states.