What we are doing to combat the state of the construction industry landscape

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Alongside a house price boom, Australia is in the midst of a homebuilding boom with the Housing Industry of Australia expecting that a near-record number of new homes will be built over the next 12 months.

But for many in the residential construction sector, it’s a profitless boom – and several major players have recently gone bust, with the assumption that more will follow.

Why are construction companies folding?

A perfect storm of factors has been brewing for the better part of 2021, and now the rainy season has arrived.

Supply chain issues, with a shortage of building materials worldwide resulting from COVID-19 disruptions, coupled with natural disasters from freak storms and flooding to bushfires, have provided significant pressure on builders.

Those shortages have led to prices rising exponentially, particularly for timber and steel.

On top of that, a labour shortage is making it difficult to find tradespeople, giving workers the power to command huge wages.

So, the overall cost of construction has been pushed up significantly.

Adding to this is the lengthy delays in actually getting the materials, which has led to some homes taking more than 12 months to be built, further adding to building companies’ costs.

With the majority of builders signing fixed-price contracts with buyers, and the margin for escalating costs being inadequate, many are losing money on every single project.

It’s a big problem in exceptional circumstances like we’re seeing at the moment, said Russ Stephens, co-founder of the Association of Professional Builders.

“The average cost of a contract for a builder has gone up between 15% to 20% over the past six or seven months alone – and up to as much as 50% in some areas,” Mr Stephens said.

What we are doing to combat the state of the construction industry landscape

32 Degrees Building has been operating for over 11+ years, and we know and understand how to manage our business in turbulent times.

We have been working with our team and talking directly to our suppliers to manage and understand any upcoming supply challenges and supply chain issues. We have been working with our timber suppliers closely to understand their difficulties in obtaining overseas supply and then managing, monitoring and forecasting for our current and future builds. Skills shortage for us isn’t an issue, we have worked very hard to set our business apart from the rest. Our team are employed with us and this enables us to closely manage and develop their practical skills with us over the course of their apprenticeship and retain them into tradespeople and leadership roles – we now employ over 40 team members and continue to grow. By employing our team members, we manage our labour costs. This strategic approach we have applied to our business has allowed us to manage our costs and your build providing you with the security and confidence that we are here to stay.

Our business is always looking forward and planning for the future. We forecast 6 months, 12 months, and 18 months ahead to ensure we can stay one step ahead of any market issues and trends.

With the above in mind, we have a strong business model and capable management team in place to ensure that the best outcomes for our clients and the business are always achieved.