Victorian tradies have revealed the major cost hikes they’re grappling with.
Victorian building industry members have revealed they’re considering cutting staff or hanging up their tool belts as fuel costs and regulatory changes hammer their bottom line.
A new Master Builders Victoria survey has revealed almost half of respondents have had project costs jump 6-10 per cent, and one in five have faced an 11 per cent blow out.
MBV chief executive Michaela Lihou said soaring prices for plumbing, concrete, steel, and electrical supplies, along with a raft of new regulations, are also risking Victoria’s housing target of 80,000 homes a year.
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Ms Lihou said fixed-price contracts were making the situation “significantly worse” with 63 per cent of their members noting they were locked into agreements with no way to recover cost surges for fuel.
She added that with industry members considering cutting staff, there could be a knock on effect for the Victorian economy — with $32bn a year coming from the construction sector and 290,000 people, 8.4 per cent of the state’s workforce, employed by it.
“It is the fourth-largest employer in the state,” Ms Lihou said.
While apprentices were among the first to go, their loss could have the biggest impact as it cut into the state’s future workforce.
Master Builders Victoria chief executive Michaela Lihou says there are big rammifications ahead if the state doesn’t address the issues facing builders.
“This directly undermines the state’s ability to deliver the homes, infrastructure and workforce it needs,” Ms Lihou said.
“While some members say they are taking steps to stay afloat, including batching deliveries, pre-purchasing materials, carpooling crews and moving to shorter projects. MBV believes that resilience alone is not enough.
“There must be fair and practical mechanisms at a state level to address extreme, industry-wide cost shocks.”
The lobby group is calling for the state government to work with them to address cost escalation clauses for contracts, time provision extensions on government projects and relief from growing regulatory burdens.
For Melbourne-based demolitions firm boss Peter Gleeson, diesel price hikes alone have added $20,000 in unexpected costs for jobs he quoted in February — well before the US and Israel attacked Iran, prompting the oil shock that has underpinned soaring fuel costs.
There are fears the impacts on builders and tradies could impact the state’s ability to build its way out of a housing affordability crisis.
The Inside and Out Demolitions operator said after 30 years running the firm, in which multiple members of his family work, he was now concerned that if there isn’t substantive diesel price relief in the next few months he might have to give up the business.
“My son and my daughter and my wife work in the business with me, and you can’t let them down,” Mr Gleeson said.
The 64-year-old added that he had been expecting to work another five or so years, but now feared his time working in the space would be measured in months.
With five excavators and eight trucks, he said his wasn’t the largest business in the space, but worked on two or three demolitions a week — most of them in the commercial shop or building space, though occasionally on removing houses.
“We are making a bit of money, but not what we need to keep the business running properly,” Mr Gleeson said.
“You’d say we are treading water.
“We are telling clients we need another $1500, and they are saying no.”
Soarign diesel fuel costs are having big impacts on demolition crews, who can fuel up 200 litres at a time.
He’s also personally working 60-70 hour weeks, and feels like if he wasn’t taking on that load himself “we’d be going down hill quick”.
Mr Gleeson said that it was feeling a lot like the material cost crisis that followed Covid, that his business had not had the chance to recover from.
“I can’t go through this again … I’m getting older and I don’t want to lose all our money again, it’s too late to start again,” he said.
Also hitting his business have been land tax burdens, increasing costs for dropping refuse at tips and tolls.
Foundation Technologies Australia business manager Steve Hassett said after going through the global financial crisis and the Covid pandemic, the current situation was worse in many ways.
“You just feel like you wake up every morning and you wonder if it’s Mike Tyson or Muhammad Ali who is going to whack you today,” Mr Hassett said.
“Because of everything in our sector at the moment, this is more challenging than Covid.”
In addition to fuel price increases he noted there were growing insurance premiums, rent rises as their landlord tried to cope with land tax costs and interest rates, wage increases and the cost of living.
Home builders and fringe industries are increasingly worried they won’t be able to contain rising costs much longer.
Mr Hassett said he’d grappled with an about $20,000-$30,000 increase in his costs since the conflict in the Middle East began.
“It feels like you get on top of one cost issue, and all of a sudden here’s another one … and then there’s another one,” he said.
While not locked in with fixed contracts the way builders are, he said he was also conscious that those builders could run into difficulty if his firm sought to recoup too much of the increase.
Even so, he thinks it will be another three months before he must begin passing on increases as he grapples with some businesses seeking to gouge his own firm.
“We questioned one of them on a flat-rate fuel surcharge recently and they agreed to halve that for us,” he said.
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