Reno-nation forges ahead but sole traders pay the price

Hipages CEO Roby Sharon-Zipser. Picture: Ryan Osland

Reno-mad homeowners are forging ahead with projects despite soaring inflation, putting more pressure on tradies to keep costs down amid challenging market conditions.

Masters Builders Queensland Gold Coast regional manager Adam Profke said many sole traders had already shut up shop due to price hikes, delays and labour shortages.

But demand continues to grow, with Queenslanders intending to spend an average of $14,536 on renovations or repairs per household over the next six months, hipages’ Tradie Trends Report 2022 shows

Hipages’ report shows 85 per cent of tradies raised prices as building material and fuel costs skyrocketed, but 80 per cent of Qld contractors capped increases at 10 per cent or less.

The cost of building a house increased by more than 15 per cent over the last 12 months, with 20 per cent price hikes for timber, board and joinery, and 16 per cent for other metal products.

Building giant Condev collapsed under industry pressures. Picture: NIGEL HALLETT

“We are always concerned about financial viability where builders continue to absorb those costs,” Mr Profke said.

“Unfortunately that is happening every day — the small sole trader business that can’t sustain the losses anymore; they are the ones who disappear.

“We only talk about the Condevs, the Pivotals, but unfortunately the smaller builders are facing the greatest challenges on a daily basis,” he said.

Building giant Condev collapsed in May, citing “challenging market conditions”, while Gold Coast home building company Pivotal Homes was placed into liquidation later the same month.

The construction industry was already buckling under huge demand in the wake of the pandemic building boom, compounded by disruptions to the supply chain caused by the war in Ukraine and lockdowns in China.

Smaller builders are pulling the pin every day, says Master Builders QLD. Picture: Tertius Pickard

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Hipages founder and CEO Roby Sharon-Zipser said tradies were taking on more costs to reduce the impact of inflation on homeowners’ hip pockets and safeguard future business.

“The current cost of materials is doing the most damage to the bottom line and remains the main reason they’ve had to increase prices,” Mr Sharon-Zipser said.

“This is unsurprising, as the domestic and global supply of building materials is tight, with shipping delays, strong demand, ongoing supply chain disruptions, and high international freight costs impacting suppliers and businesses.”

Mr Profke said a backlog of residential and commercial construction work had been exacerbated by repair work following last season’s record flooding.

Hipages chief customer officer Stuart Tucker.

Hipages chief customer officer Stuart Tucker said more than one-third of the sole traders or small business owners surveyed had absorbed costs themselves rather than pass them on.

“Hipages is urging homeowners to have transparent conversations with their tradies about timing, urgency and cost with empathy,” Mr Tucker said.

“For the vast majority of tradies, any price increase is done with great hesitancy, as they would far prefer to avoid passing increased costs on to their customers.

“In fact, for over a third of these tradies that have increased their prices, they are still absorbing costs due to inflated market prices, while 60 per cent are purely covering the additional costs with inflation pressures,” he said.

To offset rising overheads, tradies were seeking alternative, affordable materials to complete a job where possible, limiting the distance they’d travel to save on fuel, hiring apprentices or other workers, and using apps to reduce time spent on administration tasks.

Pivotal Homes Managing Director Michael Irwin and Lawyer Derek Cronin announced the demise of the company in May. Picture: Richard Gosling

Nationwide, a separate survey by Houzz found 49 per cent of homeowners planned to renovate this year, with the average spend of $25,000 in 2022 up 67 per cent from 2019.

Houzz Australia managing director Tony Been said recent homebuyers spent up to $50,000 more on renovating than long-term owners, undertaking larger-scale projects such as adding rooms or updating electrical and plumbing systems.

“Homeowners are clearly committed to investing in their homes despite heightened product and material costs driven by supply chain disruptions, and are exploring diverse funding sources,” Mr Been said.

“This is especially pronounced among recent homebuyers, who rely heavily on cash from previous home sales to fund their projects and spend significantly more than the national median.”

According to hipages, the majority of home improvement projects planned were repairs and maintenance, as well as catering to changing living needs.

The post Reno-nation forges ahead but sole traders pay the price appeared first on realestate.com.au.

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Reno-nation forges ahead but sole traders pay the price

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