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Building costs go through the roof, dashing homeowner dreams

The cost of building has skyrocketed since the start of the pandemic, putting first home buyers in a bind. (ABC News: John Gunn)

Tania Williams and her husband have been trying to build their first home for about eight years.

So when the project ground to a halt and they had to withdraw their mortgage application, the couple said it was "quite distressing".

It was uncertainty over building costs that tripped them up.

Theirs is one of many stories of people being caught out by the rapidly rising cost of building in Australia.

Tania Williams and Dave Brandon have faced multiple setbacks. (Supplied: Tania Williams)

Ms Williams and her husband had plans drawn up a house on the NSW far north coast, but were forced to put the project on hold when the builder pulled out.

They decided to try again after the federal government announced a building stimulus packages in response to COVID.

"There wasn't a supply of timber, and the price for when that timber became available was unknown."

The couple withdrew their mortgage application so it wouldn't affect their credit history, but were uncertain about how to proceed.

"We've clicked over into our 50s and we know banks start getting nervous with entering into mortgages with people who have entered that time period of their life," she said.

In the meantime, the couple are juggling rent, the mortgage on their vacant block, and university accommodation costs for their children.

Despite the hurdles, Ms Williams said she felt lucky to be able to afford those costs amid an ongoing housing affordability crisis.

Costs upon costs

Matt Saunderson, a quantity surveyor who assesses the costs of major building contracts, estimated the cost of building materials had risen by about 20 per cent in a year.

"For an average project home worth $400,000, it could have gone up by at least $100,000 in the past 12 months," he said.

He said it was like nothing he had ever seen in his 25-year career.

A key issue is the cost of framing timber, a fundamental building material.

Mr Saunderson said in January 2021, framing timber started from $3.20 per metre. By November, it was $8 per metre – up 150 per cent in eight months.

He said much of this was due to fires destroying pine plantations across Australia, the US and South America.

Framing timber, a fundamental construction material, rose significantly in 2021. (ABC News: Luke Bowden)

Lengthy waiting times for local councils to approve development applications were adding to the delays.

Mr Saunderson said those extra delays meant extra costs.

"There's a lot of [development applications] in at the moment but the delay in getting approval, especially over the last 12 months, it's cost people a lot of money."

Meanwhile, the insurance builders were required to take out added yet another layer of cost.

Home building compensation provides homeowners with a safety net in case builders cannot complete the building or fix structural defects because they have died, gone missing, or become insolvent.

Quantity surveyor Matt Saunderson says the rapid rise of building costs is like nothing he's seen in his 25-year career. (Supplied: Matt Saunderson)

It is a legal requirement in NSW and is only offered by the state government-operated provider icare.

Builders have to offer up security to the insurance company as part of this arrangement, and many will use their own home to do that.

The more security a builder has, the more he can build – but it means builders can only take on a certain value of work at any one time.

"So even if he has the capacity to build more, his insurance actually tells him he cannot build more," Mr Saunderson said.

Additionally, Peter Leotta from the Tweed Master Builders Association branch said those insurance premiums had increased "considerably over the last three years, and even more so over the last 12 months or so".

Tradies in high demand 

Amid a spike in building and home renovation projects, Mr Saunderson said the industry was facing an "unbelievable amount of pressure".

"If you call a plumber or an electrician and he doesn't call you back, it's because he's probably got 20 other people all calling him at once wanting work done."

He said that was being made worse by a lack of apprentices entering the sector.

"Over the last 10 or 15 years we've been pre-conditioned to send all our kids off to uni," he said.

That might change going forward, with TAFE NSW reporting a large demand from school-leavers to start apprenticeships.

"From the beginning of 2021 compared to 2020, we absolutely saw tens of thousands more apprentices enrol across all the trades," said TAFE's northern NSW regional general manager Susie George.

"And comparing that to pre-COVID, since 2018 to now, we've also seen a strong increase."

Ms George pointed out that a prospective apprentice needed an employer willing to take them on.

"There are a lot of wage subsidies for the employers to take on apprentices, so there's certainly pathways," she said.

Matt Saunderson says he's concerned the construction industry hasn't trained up enough new tradies. (PEXELS: BURST)

But Mick, a small builder from the Ballina area who contacted the ABC, said he had just finished training an apprentice and the financial incentives did not justify the cost.

"It's not until the end that your apprentice is starting to carry his own weight," he said.

"So financially it's not a good thing for builders and I can see that being a disincentive in a lot of cases."

Mick said taking on an apprentice was more a "labour of love" than a financial investment.

"You don't do it for the money, you do it because you want to bring someone through and give back to the trade, really," he said.

Do it now

For those tossing up whether to jump in or wait out the building boom, Mr Saunderson has one piece of advice: don't wait.

"While we won't see the rises we've seen in the last 12 months, because a lot of those [supply] issues will work themselves out, labour will not come down," he said.

"It will probably bubble along at between 5 and 7 per-cent per year."

"So my advice would be don't wait, get out here and do it now, because it will only get more expensive."

Tania loves her vacant block's "beautiful view" but worries she and her husband might have to change their building design to secure a builder. (Supplied: Tania Williams)

In the meantime, Ms Williams said she and her husband were still optimistic they would make the leap to home ownership.

But at a time when many experts are calling for more sustainable and efficient houses, Ms Williams is considering giving up a "beautiful, sustainable" design in order to find a builder who will take the project on.

"What I'm thinking we'll need to do is put a big line through about $40,000 worth of architecture plans, designs, development applications, and start again," she said.

"I think the style of house and materials required is getting in the way, and I think we need to look at a more conventional concrete slab, standard kind of house."

And would giving up on the dream design be worth it to be a homeowner at last?

Ms Williams doesn't know the answer yet.

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