The Ripple Effect: Challenges Developers are Facing in Melbourne
The construction sector is no stranger to wild waters, though recent years have been more unprecedented than most. Though we’ve seen much of life ‘return to normal’, the construction industry continues to face hurdles resulting in high costs, slow construction times, and abandoned projects.
The construction industry in Australia has been severely impacted by a confluence of factors including inflation, extreme weather events, the ongoing situation in Ukraine, and changing COVID-19 restrictions. As a result, many building companies have been forced into liquidation, causing significant concern among developers who now face multiple challenges dominating the industry.
Supply issues
Materials needed to carry out projects are not readily available. The time frame to bring these materials in remains slow – not to mention, expensive – delaying construction processes. Supply chains are being interrupted frequently, adding further delays. Consequently, projects that usually take around three months to complete are taking over quadruple the time.
Construction costs
The economic climate in Australia remains turbulent, with the cost to fund construction projects currently sitting above the profit margin. Prices of timber, metal, and concrete are in a constant state of flux. Rising petrol prices have also played a role globally, affecting delivery costs. With the inflation rate in Australia climbing to a staggering 7.8 per cent by the end of 2022, everyone is feeling the crunch on their wallets, developers included.
Labour shortage
The completion rate of projects continues to slow down due to the persistent shortage of skilled labour. Although there are plenty of jobs available, many skilled workers have left the construction industry, resulting in a desperate situation where skilled positions remain unfilled.
Buying hesitancy
Due to these ongoing issues, many are hesitant to buy, build, or renovate. Potential homeowners are sitting tight to see if prices drop lower, with first-time buyer numbers sitting at a record low in Victoria. At the same time, interest rates on mortgage repayments are skyrocketing, further discouraging potential homeowners or renovators from taking the plunge.
The ongoing issues in the construction industry are not only affecting individual projects but are also creating a ripple effect that impacts the entire sector. This is leading to a growing number of construction companies going into liquidation or developers cancelling projects that are no longer feasible in the current climate. The industry must find ways to address these challenges and adapt to the changing landscape to ensure its long-term sustainability.
