Property industry executives see light at the end of the tunnel when it comes to the rising cost of materials but are wary of ongoing labour shortages after a "perfect storm" of challenges in the past two years.
Richard Crookes Constructions Hunter general manager Luke Gerathy told a Property Council lunch in Newcastle on Friday that his firm's costs had been rising 1 per cent a month for more than a year.
"As an industry we saw things really take off in about May last year, and it hasn't stopped," he said.
"Steel was lifting and those sort of components. We were factoring in a couple of months of that.
"What came behind that was the COVID wars.
"The industry had serious supply chain issues out of China and Europe, which added program pressure and cost escalation issues, and that has just continued through.
"Then, from an industry perspective, it started to rain. The unprecedented weather continued for months."
Mr Gerathy expected material costs to level out, but staffing issues would persist.
"In the background ticking away was the labour shortage," he said.
"We're heavily reliant on immigration for key trades, on China and Korea in wet trades, on the UK and Ireland for our carpenters and bricklayers.
"A lot of those people went home and haven't come back. The impact has been almost a perfect storm with a long tail.
"It's impacted across the board probably one per cent a month in costs, which is a lot higher than what the actual inflation rate is."
He called on the government to make it easier for workers to immigrate.
"The cost escalation has changed. Material supply chain issues, I wouldn't say they're over. China has still got a policy of no infection, but it is getting better.
"What the energy thing does to manufacturing in Europe. We are heavily reliant on all that technology that comes out of Europe.
"That's a factor, but it's becoming better understood.
"The volatility lies in staff. That hasn't been resolved, and that's got a little bit more to play out in those less skilled trades we're heavily reliant on immigration for.
"There is an incredible amount of work still in the system. There's been a huge shift of what was supposed to have been built last year being pushed into this coming year. That just adds to it."
EJE Architecture director Kathy Gresham said the industry had not experienced such a costs "shock" since the introduction of the goods and services tax in 2000.
"Since then it's been a steady increase, and then we've had 25 per cent in two years," she said.
"A bit less in commercial construction, but certainly that in residential construction."
Ms Gresham said the government's two major infrastructure projects starting in Newcastle, the inner-city bypass and John Hunter Hospital redevelopment, would put more pressure on the construction industry.
"You've got $450 million on the bypass over the next four years plus the $800 million on the hospital.
"I imagine some of that will encourage trades to the area, which is a positive, but it is going to be challenging across the commercial sector for the next four or five years."
She said attracting more young people, including women, to take up building trades should be a priority.
Asked whether the industry would have a "glut" of young tradespeople in line with new training subsidies, Mr Gerathy said: "You could do that for the next 10 years and you won't have enough. Just keep it coming."
DOMA Group development manager Chris Farrington said the government should open borders to unskilled migrants "prepared to do things that perhaps the majority of us aren't".
DOMA, which has developed six government-owned sites in Newcastle, including the planned 30-storey Store building, is looking around for more land in the Hunter.
"The Store is our last active project in the market at the moment," he said.
"One of our greatest focuses coming from head office at the moment is we need more sites in Newcastle and the surrounding region."
WHAT DO YOU THINK? We've made it a whole lot easier for you to have your say. Our new comment platform requires only one log-in to access articles and to join the discussion on the Newcastle Herald website. Find out how to register so you can enjoy civil, friendly and engaging discussions. Sign up for a subscription here.
