“The situation between builders and consumers is very unpleasant and not pleasant at all. Consumers don’t understand, they’re going to find they’re going to be in limbo for so long and [it will] it still took an arm and a leg to finish.
“If consumers can see a clear path to negotiate and get a little extra money from their lender and make a deal with their builder to move on, that’s a much better outcome than closing the door.”
Builder Alex McGough said rising construction costs mean he has been forced to build at a loss in many cases.Credit:jason south
Melbourne builder Alex McGough of AMG Construction Group has honored all contracts despite rising costs that no longer reflect the price of construction and works seven days a week to keep his losses to a minimum.
“I had to stick to what I quoted and I just had to get the job done, I had to get a little creative in how I do some things,” like buying materials up front before progress payments are made, McGough said. “Honestly, I’m in there putting in great days and hours to make up for the loss.”
Newer and increased contracts simply reflect the actual cost of a build rather than generate a higher profit margin, he said.
“I’m not making more money, I’m just trying to account for trade-ins and materials at a higher cost,” he said.
“Honestly, I’m in there putting in great days and hours to make up for the loss.”
Melbourne builder Alex McCough of AMG Construction Group
“In reality, nobody is making more money; all have had to raise their prices to stay where they were. If anything, builders are earning less than they used to even though there is a lot of work to be done. The word that keeps going around is a useless boom. If you think it’s expensive to build a house now, if enough builders and tradesmen are burned, the market will shrink and it will cost a lot more to build a house in the next few years.”
McGough said two prospective clients have put their plans on hold after receiving higher-than-expected quotes.
Higher construction costs have hit consumers’ pockets, as building approvals fell 23 percent in the three months through July, compared to the same period last year.
But they remain at elevated levels and are still 12 percent higher than the same three-month period in 2019, according to the Housing Industry Association.
Rising interest rates will compound pressure from rising construction costs and cause sales of new buildings to fall, said Tim Reardon, the association’s chief economist.
Charging
“The cost of borrowing and the cost of construction is higher now, so it’s an aggravated impact,” he said.
NSW Master Builders Association chief executive Brian Seidler said some builders now quote a price that is “cost plus” that adds a certain amount of markup to material costs.
“That means that every raise, whether it’s materials or labor, has an agreed-upon percentage on top of whatever it is. It’s to cover their costs,” Seidler said.
He said it was better for consumers to come to an agreement with their builder, since abandoning a contract means a new contract would take current costs into account.
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