Demand for home builds continues to rise
Australians are paying more for new homes and land, according to new reports. There have been multiple factors affecting this, with the COVID-19 pandemic being only one. As studies have highlighted, the 5% surge in property prices in the past year was merely accelerated by pandemic restrictions.
That increase has been relatively steady over the past few years; to try to mitigate many of the consequences, many government agencies instituted grants and other measures. These initiatives, which focused on helping potential homeowners build or buy their houses, don’t seem to have greatly helped.
In contrast, many building grants have time restrictions in place. Rather than risk losing these, many home buyers and builders are speeding up their project. That’s had a domino effect on overall prices, as many grant holders compete for limited labor and materials.
Coupled with that have been recent bushfires, which have eliminated large chunks of timber and other supplies. When combined with several other factors, many industry analysts have noted that demand is at an unprecedented level.
That’s just as true for house and land packages, with the Australian Bureau of Statistics claiming that private home builds have increased by over two-thirds since last year. That varies depending on state, although the likes of New South Wales seeing private home builds increase by 30.1%.
The demand can be felt by potential buyers across the country. For property lots across the country, possible owners can be up against hundreds of other people when applying. As a result, the prospect of buying land or a home could feel ever-distant.
Pre-pandemic, developers would have to put on a show to get buyers interested in the property. In many ways, it was a buyer’s market. For projects that were outside of the city, that was especially true.
Now, the opposite is true, as people are flocking to buy. Because of recent events, and the slow increase of remote working, a large percentage of people are fleeing city life. As a result, it’s become much more of a seller’s market. That hasn’t been without its consequences, as buyers are now feeling the pressure.
Increased demand fuels price hikes
The increased demand for building new homes has led to land and other costs reaching quite a high price. The Australian Bureau of Statistics notes that the average cost of building a house was $320,238 in the 2018 to 2019 fiscal year. Builders have noted, however, that costs have gone up significantly since then.
Some reports suggest that the average cost has gone up by 5% since the start of the COVID-19 pandemic. That shows no sign of stopping anytime soon. In fact, it looks to continue increasing, as the supply chain continues to be negatively affected by restrictions.
These limit the ability to transport building materials around the country, which places the ones available at a premium. As a result, the bare bones of building a home can add up quickly. Adding to these are competing bids for labor.
With the steady increase in construction projects across the country, builders can now pick and choose what they work on. As a result, they can often set their own price. While much of this will be related to materials and other costs, their labor could come at more of a premium that it was pre-pandemic.
That hasn’t been the only way that COVID-19’s impact on the supply chain has affected the building of new houses. Materials are taking longer to be delivered. As a result, it can take much longer than previously for them to be delivered.
For any new property owners who have already started building their homes, that could mean delays of weeks, if not months. Though little work may be going on, these delays have still proven costly, as contractors and others will still need payment when they come back.
More people are also buying the same materials and supplies, of which there’s only a limited amount of. Timber, for example, has seen its demand increase by a third, although much less of it has been imported in recent months. As a result, supply continues to dwindle.
That’s led to a perfect storm of decreased availability and increased demand. Those who want to work to start on their home often find themselves competing with others for the same contractors and laborers.
Lack of buildable land
These haven’t been the only factors that have impacted home build prices, however. There’s also been a lack of buildable land. While cities have continued to spread outward, people are only willing to live a maximum distance away from established centres. That’s put drastic limits on where they can build homes.
Added to that is that most acceptable land may have already been built on. Should new owners want to build their own home, then they’ll have to add in the costs of destroying the original property.
There’s also the fact that, with city spread comes leisure centers and other non-residential property, which limits where homes can be built. In urban centers, quite a significant amount of land is designated solely for industrial or commercial purposes.
Because of the increased demand for property, people across the country are calling for many of these areas to be re-zoned. Doing so would free-up much-needed space, which could help drop overall prices. Some have argued for high-density housing, such as apartments, being placed in these areas instead.
As it stands, that doesn’t look likely for many first-time homebuyers. With a lack of available space, and properties that are often outside of their budget, more people are being forced outward. Coupled with ongoing events, that’s led to a similar rise in prices in more rural or suburban areas.
Whether this means that city-dwellers will see somewhat of a drop in price and if property prices between rural and other areas balance out remains to be seen. Despite this, potential homebuyers and other continue to ask that governmental agencies step in to prevent housing costs from exploding further.
At the moment, however, it looks as though it’ll be a first come, first served process.