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Cost blowouts, labour shortages hit SA builders

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South Australian builders say the huge number of projects in the pipeline, skills shortages and spiralling material costs are set to hamper the local residential housing industry until mid-2023.

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Tuesday’s interest rate rise may slow sales activity in the coming months, but it is still expected to be up to a year until the monthly number of project completions outpace the number of approved new home applications entering the system.

The latest Australian Bureau of Statistics building approval figures, released yesterday, show that in April, South Australia had 795 new homes approved for construction, up 7.7 per cent on March in seasonally adjusted terms.

While the number of new homes approved for construction is down on the HomeBuilder-fuelled April 2021 figure of 1085, it is still tracking slightly above pre-COVID levels. The number of new homes approved in April 2019 was 665.

Housing Industry Association (SA) executive director Stephen Knight said it would remain to be seen what impact the latest interest rate rise would have on new home sales.

However, he said the high number of sales over the past two years coupled with materials and skills shortages meant there were 75 per cent more houses under construction in the state currently compared with historic levels.

“Until completion numbers exceed commencements then times for builds will be blown out,” Knight said.

“This is not expected to happen until mid-2023.”

According to the Housing Industry Association,  between about 6500 and 8500 new homes were built in South Australia annually for the past 30 years.

But the HomeBuilder scheme introduced following the onset of the COVID-19 pandemic in mid-2020 resulted in 11,278 new builds in 2020.

According to the ABS, there were 11,792 building approvals in the 2020-21 financial year.

In the first 10 months of the 2021-22 financial year, there have been 8354 new homes approved in SA with 6496 of those in Greater Adelaide.

Building hotspots include Mount Barker (410), Two Wells (434) and Munno Para West/ Angle Vale (535).

Major infrastructure projects in South Australia such as the South Rd project are expected to take more workers away from residential construction as civil construction projects ramp up.

Knight said the shortage of skilled workers was at the worst level since records have been kept.

He said material prices were also rising at the fastest level on record.

“For SA, across the board, there have been annual price rises of 20-25 per cent –   structural timber is up 39 per cent, steel products up 42 per cent.

“Trade shortages are a global issue but particularly in Australia we have had to contend with floods and other natural disasters and a lack of skilled workers immigrating has exacerbated the issue further.”

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