Construction costs are rising…again.
Property owners looking to build, repair, or renovate properties could see their budgets swamped by a new wave of price increases, according to Master Builders Queensland.
Central Queensland regional manager Dean Phillips said builders had received advanced warning that key products were set to spike in February.
“The indication from our leading retailers is these costs are going to continue to escalate,” he said.
It comes following drastic price hikes after the onset of COVID-19, when building costs soared by 34 per cent between September 2019 and September 2023, according to the consumer price index.
So how does this affect your body corporate?
Building and maintenance costs for body corporates are set to spike even more.
Builders are still reporting significant material delays on certain goods including timber, steel, windows, doors, roof tiles, bricks, electrical equipment and waterproofing insulation.
These are all materials that are commonly used for body corporate repairs. The cost of those items was rising across all of those items and in many cases, over 25 per cent.
An even if you can get materials on time and at a reasonable price, there are issues with finding qualified persons to do the work.
Coupled with the aforementioned supply issues, Queensland is also experiencing unprecedented levels of demand for new projects that is unlikely to slow anytime soon.
On the Gold Coast alone, there are literally hundreds of new developments underway including many massive new towers. That’s a huge drain on workers and resources. Then, the Olympics are coming to Brisbane, further pushing up prices and demand.
As these trends are set to continue for many years to come body corporate committees in QLD will need to adapt and employ strategies that account for rising construction and maintenance costs.
These could include:
- Minimising the need to get extra quotes – by law quotes are required except in exceptional circumstances. Getting multiple quotes is good practice, However – in these times you may want to reconsider the necessity of gathering up additional quotes when you have perfectly reasonable options on the table
- Getting organised and book works early – There can be a tendency in strata for allowing to the final OK to commission works be delayed for months while people wait for meetings or look at alternatives. With rising construction costs and tradies booked out these delays could cost you dearly. If you have a quote from a contractor that you think is acceptable, maybe just accept it as you may be better off agreeing to book the works now rather than wait.
- Stick with reliable contractors – If you have reliable contactors that you have dealt with for years, work closely with them and make sure you get their advice and opinions. Keep them invested in doing good works for your scheme rather than somebody else.
- Prioritise essential works -consider what jobs actually need to be done and which can be delayed.
- Getting a new insurance valuation – Rising construction costs affect how much it will cost to replace your building. Strata committees would be wise to instruct a new Building Insurance Valuation to ensure that their schemes are not underinsured.
The Body Corporate and Community Management Regulations requires that a body corporate must be insured for full replacement value, regardless of the original construction cost, to ensure you are properly insured for an insurable event.
There are many additional factors affecting the replacement costs of a strata scheme, these include:
- Availability of labour
- Building costs
- Quality of finish
- Shared facilities
This ensures coverage for the building replacement if it is destroyed or damaged beyond repair. The insurance value must cover the amount it would cost to rebuild the entire building, or where damaged; replace elements.
Poor estimation of these costs could result in schemes being under‐insured, and subsequently, owners being unable to afford to replace their building. The small savings made by seeking lower premiums on an under‐insured scheme are heavily outweighed when it comes time to managing your risk and replacing a building.
A rise in construction cost for both materials and labour will affect your building’s insurance valuation and Strata committees would be wise to instruct