The Master Builders Association of New South Wales has released some staggering figures which prove just how tough building companies and contractors have been forced to do it over the past 12 months of Covid-19.
It’s now almost 28 months since the first case of Coronavirus was reported in Australia on January 25, 2020, but for the first year or so of the pandemic, building and construction came through relatively unscathed, compared to most other major industries.
For example, the building sector wasn’t forced to close at any point anywhere in Australia during 2020 and while the cancellation or postponement of some major projects led to massive job losses, it’s fair to say that it could have been a whole lot worse.
In fact, the demand for home renovations actually rose during the first 15 months of the pandemic, and for the first quarter of 2021 (calendar year), home renovations surged by 11.3 percent!
Experts put this down to homeowners having more money to spend than usual.
The health department restrictions, lockdowns and border closures saw homeowners put the funds they normally set aside for interstate and overseas holidays into remodelling their homes, while those forced to work remotely were also more cashed up, saving considerably on travel expenses to and from the office, work lunches and the like.
Yes I Can Renovations is Sydney’s most innovative building company, providing a wide range of home improvement services in Greater Sydney, headed by bathroom, kitchen and full home renovations.
In 2020/2021, we broke all of our previous turnover records and were heading for another bumper year in 2021/22 when disaster struck – not just for this business, but for thousands of others building companies and contractors throughout New South Wales.
It’s now history that without any formal consultation with the industry, former premier Gladys Berejyklian announced a snap two-week lockdown of the building and construction industry on July 17, 2021, giving companies like ours just hours to lock jobsites down and make them safe.
Two weeks later, Berejyklian announced a partial easing of the ban but this did nothing to assist 90 percent of the industry as it coincided with further tightening of restrictions in the various NSW Local Government Areas of concern.
Close to 30 percent of Sydney’s tradies reside in those LGAs, meaning they were not permitted to resume work as despite the importance of building and construction to our state’s growth, infrastructure and economy, the Health Department did not deem builders and other tradies to be “authorised workers”.
Basically, this meant that companies like Yes I Can Renovations were unable resume work and therefore complete existing jobs – let alone start new projects - for several months and indeed in some cases, jobs contracted in mid-2021 were not completed until the early months of 2022.
Then to top everything off, when the state Government finally gave the green light for everyone to go back to work, companies were faced with extraordinary increases both in terms of labour costs and in the costs of building materials.
Forty Two Year High
The NSW Master Builders Association (MBA) is the leading building and construction industry organisation across the state and it is a body of which Yes I Can Renovations is a proud member.
In a news release circulated on May 2, the Master Builders reported that building material costs are now increasing at their fastest rate since 1980 – so in well over four decades.
Building materials are now more than 15 percent higher than they were 12 months ago and this goes for everywhere in Australia, not just NSW.
Reinforced steel and steel beams both jumped by over 40 percent in the period from March 2021-March 2022, with structural timber up by more than 39 percent and plywood and board by close to 30 percent.
The cost of plumbing and electrical materials also rose steeply, including electrical cable by 27.1%, plastic pipes and fittings (26.5%) and copper pipes and fittings (25.7%).
While these huge price increases will obviously mean that building new homes is going to be a far more expensive exercise in the future, builders are already feeling the brunt of it, as many of them signed fixed price contracts with their customers and therefore have been faced with huge losses.
The Master Builders Association is asking all parties involved in fixed building contracts to be “flexible and realistic” in the hope that customers having their homes built for them will agree to negotiate with their builders with regard to building cost components.
Whether customers agree to come to the party is in the lap of the gods but the MBA puts the case for the builders very succinctly and logically: “It is in no one’s interest for their builders to go to the wall over a fixed price contract signed when nobody could have foreseen these increases.
“Clients with builders who go under will be left to navigate complex insurance claims and in the end, they may be both out of pocket and unable to secure a builder to finalise construction. It is far more sensible to re-negotiate the current contract considering the unforeseen changes in material costs and timeframes.”
Building companies like Yes I Can Renovations have already been significantly impacted by these huge increases in building materials costs,with director Richard Dargham making the magnanimous gesture of deciding to honour existing fixed price contracts.
“When Sydney began to ‘open up’ again from last October, the economy was still slowing down and hyperinflation occurred within the building industry,” Richard explained.
“Material costs, and labour as well, increased by anything between 30 and 50 percent, but at no time did I suggest to my customers that I wanted to renegotiate the contract with them.
“We absorbed the costs ourselves, thereby doing the right thing by our customers, many of whom had to wait several months to have their renovations completed due to COVID, the lockdowns and everything else that went with them.
“I’m glad to see the MBA going into bat for its members and hopefully common sense prevails although obviously every case must be based on its merits.
“In my situation, renegotiation never came into my thoughts – a contract is a contract and I wanted to keep faith with my customers and reward them for their patience.
“That’s not to say that much of the past 12 months hasn’t been a nightmare, because it has.
“Yes I Can Renovations lost over $350,000 in the last three or four months of 2021 (calendar year) and with no end to the increase in material and labour costs in sight, I’ve had to make some big changes this year - including restructuring and even downscaling my business.
“By keeping my own expenses lower, I can still provide the best bathroom, kitchen and home renovations in Greater Sydney at a price where the customers aren’t hit by the full brunt of these ridiculously high building material costs….but I can tell you that it’s a real balancing act.”