While construction costs may have increased over the last quarter, the bit of good news is that it is at a lower rate than previously.
Australian Bureau of Statistics’ data shows a 2.9% increase in construction input costs, however, this was less than the past two quarters that were more than 4%.
Adam Crowley of financial services firm, RMS Property and Construction, told The Property Tribune, that anecdotally, builders say annual construction costs are even higher than the official data, putting them closer to 30%. And while material and other cost hikes have been priced into new construction contracts, many firms will still be working on loss-making jobs, according to Crowley, who has called for action.
“The sector would benefit from immediate government financial support and protection from solvency issues to help them complete the pipeline of projects that were entered into before construction costs started soaring in response to the unprecedented global conditions,” he said.
David Orr from Deloitte told News Corp last week that fixed price contracting and inappropriate risk sharing models were the major issues.
With costs still high, construction firms will also have to factor in the poor weather forecast for the coming summer months. Crowley warned that companies that do not have good oversight of the state of their balance sheet, cashflow, work pipeline and future profitability will be hit harder.
Image: UNO Melbourne, the 65-storey apartment building design and construct project Roberts Co. took over after Probuild collapsed earlier this year.