Working in the construction industry in 2022 has been a challenge. From heatwaves to floods, lack of quality labour and increases in materials, it’s no wonder we’ve seen an influx of construction companies pulling the pin on major projects and entering into liquidation.
It’s safe to say that 2022 is not a good year for anyone in the construction industry in Australia – whether you’re the customer, the construction company, or a worker. Here are some of the major factors impacting the industry.
One of the main contributing factors to the struggles faced by those in the industry is the skyrocketing cost of materials, and the fact that materials are in short supply. This is true of materials such as timber, where states like Victoria have pledged to end native logging in 2024 – hardwood native timber is often used in framing of freestanding houses. This migration away from native timber in the name of conservation means that Australian builders are reliant upon imported timbers, which are shipped in containers – which are harder than ever to come by and who’s import costs are nearly double that of levels found pre-COVID-19.
This means that the cost of material acquisition is higher than it’s ever been, while simultaneously, there’s a shortage of necessary materials – or a months-long wait for them to arrive. Furthermore, national bushfires are causing incredible damage to timber supply, as thousands of acres of native timber are burnt to a crisp.
Another huge contributing factor to the current state of the construction industry in Australia is a massive labour shortage. It’s also a skills shortage. Before COVID-19, Australian building companies used to be able to call upon workers from Ireland and New Zealand to fill the gaps in the skilled-trades industry that construction so heavily relies upon. However, the shutdown in travel during COVID-19 and the exorbitant costs now associated with international travel, inflation meaning necessary higher wages, which are not capable of being met, means that these international workers are staying at home.
And there aren’t enough trained Australians to fill the gaps left behind. The government is expanding its vocational training opportunities for Australians, but not fast enough.
The end result of a spectacular rise in demand for Australian homes, a huge lack of supply of basic building materials and an incredible labour shortage that can’t catch-up fast enough is that many building companies are going bankrupt and shutting their doors. This is because companies have promised to build housing for customers who pre-paid for their homes, not anticipating the exorbitant cost of production rise, meaning that companies can no longer afford the cost of materials necessary, while keeping their customers happy and maintaining any sort of profit. This means that dozens of Australian building companies of all stripes are going under.
The result is that there are less companies to perform builds, meaning less gets built. COVID-19 created a perfect storm for industries throughout society, and the construction industry is one of those being the hardest-hit.
Recovery is slowly starting to creep into the industry. With inflation slowly cooling, the cost of materials is likely to drop significantly in the next several months, meaning that building homes will slowly become more affordable for the builders and the markets will re-adjust.
Couple that with Australian government incentives for tradies to become trained and educated and suddenly, things look a lot rosier on the other side.
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