Input pressures ease but build costs stable

30/04/2009 - 00:00

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IF there's any upside to the current housing slump it would have to be the easing of several boom time pressures, such as labour shortages, input costs and time blowouts.

Input pressures ease but build costs stable

IF there's any upside to the current housing slump it would have to be the easing of several boom time pressures, such as labour shortages, input costs and time blowouts.

During the past six months, build times have come down, labour is more readily available and less costly, and some materials costs have become cheaper.

But the shift hasn't been across the board, with materials such as concrete and cement actually rising in price, while many builders are cutting already slim margins to remain competitive.

Spadaccini Homes managing director Rob Spadaccini said there was a degree of confusion in the marketplace, with some clients misled into thinking that the cost of building a home had fallen.

"We have a lot of clients coming to us saying they want to wait another three, four, six months because they think the market's going to come back further. It's not going to come back further," he said.

"Every day we're getting price increases. Concrete's going up, cement's going up, steel is probably one of the only major input that has pulled back. Labour rates have come back, but not 20-30 per cent.

"But a lot of our potential clients think the market has turned [down] 15 to 20 per cent, and they think that's over the top. So they've got a $1 million home and they think it's now worth $750,000-$800,000, but that's not the case."

Master Builders Association director Gavan Forster said many buyers were holding off because they expected construction costs to fall.

"Construction costs don't fall, they just don't go up," he said.

"My advice to people is that they might be waiting for a very long time if they're looking for construction costs to fall because yes, subbies' rates might go down, but materials are going up, and on balance it will still go up marginally for the year."

Pindan director Nick Allingame said greater availability of labour had led to better build times.

"The biggest advantage is you can actually get things built in a reasonable time, that's the big difference. You can commit to a certain length contract," he said.

ABN Group managing director Dale Alcock said costs were stabilising after sharp increases in labour and some materials, such as steel, in recent years.

"In the main, we're not seeing labour rates adjusting back that much. We've come back to our book rates, where [before] we were also paying over the top. And these other cost pressures around material supplies are tonking on," Mr Alcock said.

"So we're not at all seeing a reducing cost base in this environment, we're seeing a stabilising, it's come back a bit."

But with more labour available, apprenticeships and training programs could be among the casualties of the downturn as companies go into survival mode.

Mr Alcock said the federal government's decision to allocate funding to companies that take on apprentices who have been made redundant was short sighted.

"Surely there should be funding for retaining your apprenticeship programs. If you're heavily committed to apprenticeships, why isn't there an additional kick to that so they don't become laid off to begin with," he said.

"It's a real risk that basic issues of training aren't going on at the levels they need to be."

Master Builders Association's Gavan Forster added that builders were also diversifying in the current climate.

"The cows are going where the grass is green. You're seeing traditional commercial builders moving into the housing side, and you're seeing some of the major house builders going to some of the regional areas.

"That's what's happening, particularly for the mega jobs, there's no work, so they have to go and try and find niches in other regions or in other sub-markets to just keep feeding the beast."

 

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