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Infrastructure

Price Pressures, Labor Shortages Rein in Construction Activity

Construction

Building costs are rising at a faster rate than inflation as construction demand continues to outstrip supply for both labour and materials.

Despite billions of dollars’ worth of stimulus being poured into housing and construction, activity will continue to decline due to the pandemic.

Global supply chain disruptions have affected both material delivery and pricing as state and international border closures have led to labour shortages.

While there are major projects that are scheduled for completion over the next twelve months, there are increasing signs that commencements will decline as the uncertainty continues.

These are among the findings of Rider Levett Bucknall’s second quarter international report, which forecasts Australia’s apartment, office, hotel and retail sectors will decline in the short to medium term after significant new additions to supply over the past three years.

The report predicts the Perth, Gold Coast, and Canberra markets will experience annual construction cost hikes of more than 6 per cent by the end of 2022.

Modest increases of around 4 per cent in escalation are expected in Melbourne and Brisbane, while Sydney’s construction prices will lift by 3.5 per cent.

 Construction

▲ The surge in construction activity, combined with disruptions to supply chains and high shipping costs, prices for construction materials have soared or remain in short supply. 

Surging demand has largely come from the federal government’s HomeBuilder scheme, which has led to a bounce-back in building approvals.

According to the federal government, more than 121,000 people applied for the grant, applications for which closed at the end of March.

Sydney is currently the most expensive city, with the cost of steel rising 10 per cent in the last 12 months, rebar is up 20 per cent while timber prices have soared 25 per cent.

Melbourne prices, previously expected to jump 3.3 per cent last year and this year, were now in line for a 1.5 per cent increase in 2021.

RLB research and development director Domenic Schiafone said raw material prices for metals such as copper and iron ore were now reaching record heights.

“Material price rises have occurred for concrete, steel, timber, masonry product supplies and PVC based products used in hydraulic and electrical trades,” Schiafone said.

“Such rises are prompting trades to link metal prices as a condition of tender pricing to provide an adjustment mechanism for any material price increases.”

Schiafone said despite price pressures, recent tender returns indicated that the full extent of price increases were not yet hitting clients.

According to Master Builders, almost four in five builders are reporting “significant delays” in being able to secure concreters, joiners and bricklayers and an increase of up to 10 per cent in the cost of materials and specialist trades or labour.

Master Builders Australia chief executive Denita Wawn said federal and state government’s utilising the building and construction industry to generate economic stimulus had placed a “huge amount of pressure” on supply chains not only in Australia, but globally.

“Normally we have a west coast boom or an east coast boom, not an entire country boom,” Wawn said.

“We are trying to relieve the pressures to ensure that we minimise price hikes and manage contracts as they currently stand.”

Wawn said that while a positive of the boom was upwards of $52-billion spent overseas by Australians annually being channeled back into housing and construction, many builders entering new contracts would not have anticipated supply chain difficulties.

“Many of these contracts were signed at a time when there was no work in the system and under the assumption that the economy was going to tank,” Wawn said.

Residential property construction times had doubled across 2021, with a single-storey dwelling, which required six to eight months to build in 2019-20, now requiring between 12 to 16 months.

A double-storey home, which had previously taken 10 to 12 months, is now taking 14 to 20 months.

Nationally, the number of private-sector houses approved dropped 11.8 per cent in June, continuing a downward trajectory since the end of HomeBuilder.

Commonwealth Bank economist Kristina Clifton said the numbers were likely to continue to fall.

“Construction levels will remain higher, though, as the approval to construction pipeline can take some time,” Clifton said.

“The demand for new dwellings should moderate from here in line with slower population growth.”

 

Article Source: www.theurbandeveloper.com

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Brisbane

Hutchinson Builders takes over Cbus Brisbane tower that broke Probuild

Hutchinson Builders takes over Cbus Brisbane tower

Hutchinson Builders will take over the completion of Cbus Property’s troubled residential development in Brisbane, one of most problematic projects for failed construction contractor Probuild.

The awarding of the contract was widely expected, as family-owned Hutchies, the largest Queensland-based builder, was seen as the only contractor capable of taking on the 47-level project.

“Since commencing preliminary works on site three weeks ago, Cbus Property, together with Hutchinson Builders, continues to finalise subcontractor negotiations and prepare a revised construction programme,” Cbus Property chief executive Adrian Pozzo said on Monday.

“Once finalised, we will provide an update to purchasers with a more definitive completion timeline.”

Chairman Scott Hutchinson told The Australian Financial Review in early March he was “quietly hoping” to pick up the job and the announcement makes it second time lucky for the company that came second to Probuild in the 2017 race for the project.

Probuild had tendered a price for the project that was $40 million less than Hutchies’ price and a year faster to build, Mr Hutchinson said. Probuild has not confirmed those numbers, nor has Cbus Property.

But the project turned into such a drag for the business that Probuild parent WBHO said last year – long before putting the company into administration in February this year – that the project had racked up a $48 million loss.

Sydney-based Roberts Co has acquired Probuild’s Victorian projects and Built has taken over Dexus’ 25 Martin Place project in Sydney. The future of Greaton’s Ribbon project at Sydney’s Darling Harbour is still not clear.

Article source: www.afr.com

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Gold Coast

Gold Coast’s New Isoletto Pool Club Brings A Slice Of Europe To Queensland

gold-coast-pool-club

Over the past few years, The Star Gold Coast has been going hard on expansions as the property tries to firm up its status as the area’s most emblematic luxury address. Unlike in other Australian cities up and down the east coast, The Star Gold Coast has virtually no competition in sight, leaving it as somewhat of an incubator for the coastal city’s more premium offerings across dining and accommodation. The latest opening to help fortify that kind of reputation is Isoletto Pool Club, a ritzy sixth-floor bar and events space that’s part of the new Leisure Deck within its recently built 53-storey hotel and apartment tower.

Given the Ibizia-style Cali Beach has been such a hit for Gold Coast locals and visitors, it’d be no surprise to see Isoletto Pool Club take off as the destination pushes into its post-pandemic groove. And while Australia’s east coast is most likely heading towards its wetter months (yes – even Sydney), the opening still comes nicely timed to capitalise on all the return domestic travellers looking for something a bit more premium than the typical Broadbeach haunt.

The suite of poolside spaces that make up Isoletto aren’t breaking the mould when it comes to some of the more popular pool clubs from around the world, but the clean organic neutral palette looks incredibly inviting with its bright accents of lemon and melon. Consider it one of the few slices of European inspired spaces nudging its way into the famously outdated spread of average cafes and generic restaurants (Social Eating House being an exception) that have held Broadbeach back for years.

gold-coast pool club

The catch here is that Isoletto Pool Club will remain exclusive to all hotel guests within The Star’s numerous hotels, which span The Star Grand, The Darling, and newer developments Dorsett Gold Coast and The Star Residences. This includes anyone staying in the long-term rentals and permanent residences that make up The Star’s new apartment tower, which is opening in June this year.

There’s no subversion here. A press release for Isoletto Pool Club touts “island-inspired cocktails” and an extensive wine list, plus the kind of food menu that’s perfectly aligned with the coastal inspiration. Think casual Gold Coast staples like freshly rolled sushi and locally sourced oysters to fried snapper burgers and various acai bowls. Groups can also grab various poolside packages that include bottles of Champagne, cocktail selections, seasonal fruit platters, and some complimentary sunscreen.

The opening will be complemented by a separate Isoletto Privé, which is a dedicated event space signalled by a sprawling lawn and its own deck and terrace. And it seems The Star is really pushing this part of Isoletto, bolstering the property’s business and events portfolio with enough capacity to fit a comfortable 168 guests at long tables, 150 guests at seated banquet tables or a max of 1,200 standing guests if considering the entire Leisure Deck as well.

Article source: www.bosshunting.com.au
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Infrastructure

Homebuyers Warned as Builders Renegotiate Contracts

homebuyers feature image

The Queensland Building and Construction Commission has warned homebuyers to seek legal advice before agreeing to make payments that fall outside of the terms of fixed price contracts.

QBCC’s warning comes as builders and construction firms face escalating construction and labour costs and delays.

Earlier this week, it was revealed Oracle Homes was asking homebuyers for up to $122,000 for price variations due to cost blowouts.

Master Builders Australia acting chief executive Paul Bidwell said the ongoing war in the Ukraine was also affecting supplies.

“We’ve just seen, as a result of the Ukrainian conflict, the federal government impose tariffs on goods coming out of that region and the immediate impact has been a 25 per cent increase on engineered wood products,” Bidwell said.

“So that will add $6000 to $11,000 depending on how big the house is.

“Who would have figured that that would have happened, two months ago?”

After high-profile builders Probuild and Condev declared insolvency, a number of smaller subcontractors, builders and construction firms are barely managing to stay afloat.

“What Oracle is going through is no different to what any other builder in Australia is going through,” Bidwell said.

“They have signed a fixed price contract and in the period of that contract, the cost of materials and labour has gone up astronomically.”

Cost variations can be accounted for via rise and fall or cost escalation clauses in contracts but when and how these can be introduced into contracts varies from state to state.

With a fixed price contract the homebuyer is not required to pay any more than what was initially agreed to in the contract but it does not prevent the buyer from contacting the homebuyer to negotiate.

Bidwell said it was key to keep the homebuyer informed and to try to negotiate.

“There is nothing to stop the builder going to their clients and saying ‘here is the problem I have got. I can’t finish it by this time, it’s going to cost more, here are my invoices so you can see the costs’,” Bidwell said.

“It’s all about managing relationships.

“The builder has to manage the relationship with the client so there are no surprises.”

homebuyers 1

▲ Metricon is renegotiating some contracts.

Metricon’s chief executive Mariao Biasin recently announced that it was renegotiating contracts with some clients.

“Metricon is committed to fulfilling every valid contract in which a fixed price has been agreed,” Biasin said.

Last financial year, Oracle Homes built 112 houses worth $36.6 million, a drop of nearly two thirds compared to the previous financial year when it built 318 houses worth more than $90 million.

It has a category 6 licence allowing it to build up to $240-million worth of housing per year.

Bidwell said there seemed to be no short-term solutions.

“We do need to do more planting with forestry and more domestic production and manufacturing,” Bidwell said.

“But it won’t fix the problem in the short term.

“It’s very difficult—there’s not much that can be done.”

Monash University Professor Gerber told media this week that if a builder went bankrupt it would affect every one.

“When things start to go wrong for the builder, it really has a domino effect because all the people they are responsible for paying — their workers, their suppliers, their tradies — they all suffer and can’t be paid,” Gerber said.

 

Article Source: www.theurbandeveloper.com

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