Home Builders Deviate From Fixed-Price Contracts as Costs Grow

The demand for newly built homes is high, but Aussie builders are struggling with the rising costs of materials. Due to the HomeBuilders scheme which ended in 2021, the demand for home builders skyrocketed and some builders became overwhelmed with the amount of work juxtaposed with the lack of labour and materials.

Master Builders Australia chief executive Denita Wawn said construction costs had risen by 20-30% in the past year, locking many builders into a loss on existing contracts. She advised the local legislation should be reviewed or many builders would follow Tasmanian Constructions in liquidation.

Additional caveats, either in fixed-price contracts or ‘cost-plus’ contracts may the response for many builders. Long term operators who chose to keep steady with their workload, as opposed to taking on additional projects due to the demand, are having a more positive experience. With fewer projects and therefore fewer delays and more room to move with delayed materials and labour shortages, those who remained consistent are staying steady.

Some builders are even cutting their workload by 10-15% to ease the financial risk and allow for inevitable delays.