There’s no doubt the construction industry has had a lot of challenges in 2022. Here’s a few of them.
- Increase in materials cost
The cost of materials is rising and there aren’t enough of them. This is especially true for wood, where states such as Victoria have promised to stop logging native trees by 2024. Not only that, but bushfires and floods have caused waves in supply as well, destroying thousands of acres of trees.
As a result, builders must rely on imported wood, which is more difficult to find and costs nearly twice in 2022 compared to three years ago.
- Labour shortage
With closed borders over the past few years, and at the very least, airlines making it difficult to travel still in 2022 (prices are through the roof for some destinations), we’ve had a shortage of good labour in the country. Prior to COVID-19, Australian construction firms could hire workers from Ireland and New Zealand to fill gaps in the skilled trades industry – and they were more affordable. To keep Aussies working, however, wages have had to increase.
- Volatility
In 2022, some of Australia’s biggest name building companies have gone out of business – namely due to a rise in demand for homes, lack of building materials and lack of workers. Increased production costs have put many companies in debt, and this is backed by the Australian Bureau of Statistics stating that before COVID, the average cost of building a home was about $320,000. In 2022, that price has gone up to around $475,000.
Where to from here?
According to Master Builders Australia, even though short-term problems like rising interest rates and inflation will have an impact in future, the construction industry will grow steadily over the next few years, although growth will look very different in each subsector (civil and engineering, non-residential, and residential construction).
The outlook for non-residential building activity (social, cultural, retail, commercial, and warehousing) is good, with a small drop in 2023 and a steady rise from 2024 to 2026. For residential, long-term growth of the population means that 200,000 new homes need to be built every year. Australia is unlikely to reach this goal until 2026.
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