Why it’s the best time in many years to build or renovate
There’s no understating that it’s been a brutal time for builders and their clients since we first learnt about Covid — experiencing a complete shutdown, then a wild roller coaster ride that threw many building companies out of the carriage, sending them into bankruptcy. But things have changed, industry data shows a stabilisation in prices, normalisation in markets. We’re able to find staff and subcontractors readily again and suppliers are keen for our business rather than feeling like they’re doing us a favour. Sure there’s no going back in terms of price but once we accept the new normal we can get on and get things built with some confidence.
What a wild ride…..
It wasn’t just price escalation, labour and material shortages. It felt like the industry was in an upheaval, nobody could even predict how much things would cost. It’s not even the cost but the fundamentals of how things were billed were flipped. For example where typically a bricklayer would traditionally charge per brick laid now they would only work on an hourly rate that seemed to increase by $10 per hour seemingly every few months and even then if you came to terms with the new price - you couldn’t even find a bricklayer. Materials and the way we ordered them also impacted the industry. Materials that you could buy readily were now a special order, meaning you had to plan ahead. Items that would normally be in stock need to be imported. This causes secondary problems.
On one project we waited for 4 months to receive a hardware fitting that would normally be in stock, this had already put pressure on the program and when it came we found that the subcontractor had made an error in ordering the part and we received the wrong one. Typically this is annoying but not a big deal, within a few days you can typically get the right part, but in 2022 it meant another massive delay almost derailing the project.
All the above meant that things that would normally be simple became complicated, prices were higher but also budgets and programs became almost impossible to predict or control. The whole industry was running like a badly tuned diesel tractor, grinding gears, flat tyres, wobbly steering, broken suspension and then continually stalling and needing to be jump started. We found that even people who we entrusted to provide information and budgeting did not have a handle on price and particularly the instability at the smaller side of the market.
How things have improved for 2024:
Price Stability
The construction industry is witnessing a period of price stabilisation. The frequent cost escalations from suppliers that became a norm during the peak of the pandemic have ceased. While a decrease in prices remains unlikely—a trend consistent over the past three decades—the current stability allows for more predictable budgeting and financial planning. This predictability is crucial for both builders and clients, enabling more accurate cost estimating and reducing the risk of unexpected expenses.
Staff Availability
The availability of quality staff is a significant improvement from the recent past. The industry has seen an influx of skilled workers, making it possible to assemble teams of exceptional talent. This change is likely due to a combination of factors, including the slowing economy, completion of major infrastructure projects and faster project completion times which has led to a reduction in job opportunities and hence availability. For construction companies, this means being able to deliver on projects with efficiency and quality, benefiting from a workforce that is both skilled and readily available.
Slowing Economy
While a slowing economy might seem like a negative factor, it has positive implications for the construction sector. A cautious approach to financial commitments means that quotes are more likely to be honoured, and subcontractors and suppliers are more inclined to secure future work by maintaining competitive pricing and reliable service. This environment fosters a more collaborative relationship between project stakeholders, focusing on delivering value and quality.
Service Quality
Perhaps one of the most disappointing aspects in the last 3 years is the level of service we received even from some long time suppliers that felt like they were doing us a favour just to sell something to us. In the last 6 months the quality of service from suppliers and contractors has seen a noticeable improvement. As the economy slows, there's a renewed focus on customer satisfaction as a means of securing business. This has resulted in better support, more attentive service, and an overall improvement in the customer experience. With staff being more available, companies can allocate resources more effectively to meet client needs, enhancing the reliability and efficiency of service delivery.
Council Cooperation
Councils are now more cooperative and responsive. The staff shortages that once plagued these institutions have lessened, partly due to a more stable job market and improved retention strategies. This improvement in staffing has made the permit and approval process smoother, reducing delays and uncertainties associated with regulatory compliance. Builders and developers are finding it easier to navigate bureaucratic processes, benefiting from a more streamlined and efficient system.
Enhanced Planning and Logistics
The industry has adapted to the challenges posed by material shortages and logistical disruptions. Companies have become more strategic in their planning, anticipating delays, and ordering materials well in advance. This foresight has minimised the impact of global supply chain issues, allowing projects to proceed with fewer interruptions.
What’s ahead
Early green shoots in the form of reduced inflation and the potential for reduced interest rates signal game on for the property market which has been sluggish for the last year. In a property mad town like Sydney it’s only a matter of time before the gong is rung for the property market to escalate again and inevitably a heated market coupled with a shortage of accommodation, leads to a heated development market. I think now is the optimal time to buy, develop and build. I have seen this cycle many times and so I know that most people leave it too late, once prices have rocketed up that’s when I get a call from investors, potential buyers and developers and by then it’s a lot harder to find value in the market and get things built efficiently.
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