The housing market and building industry is under pressure, there's no doubt about that, says Ballarat veteran builder and Master Builders Association of Victoria country sector group chair Stuart Allen, but the industry's issues are not a simple black and white argument.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Mr Allen spoke to The Courier about how the boom in development in Ballarat and ongoing speculation around the continued existence of some of the country's largest construction firms needs to be tempered with an understanding of trade ands labour shortages.
Metricon Homes, which has contracts for building social housing with the state government and is offering homes in Ballarat, has been the subject of speculation about its future following the sudden death of its CEO Mario Biasin. Other construction companies including Probuild, Condev and Privium have already gone into liquidation. The company expressly rejected the speculation, saying its contracts were profitable despite facing challenges of delays and shortages.
Mr Allen says local builders are caught because most construction are fixed-price contracts, as opposed to 'cost-plus-building' contacts which offer greater pricing flexibility but are limited to $1m + jobs. With trade and labour shortfalls, cost escalation becomes inevitable, and massive cost increases follow.
READ MORE:
The fixed-price contracts are not negotiable in Victoria under current legislation. This is not the case in states like Queensland, and was not the case here in the 1980s. A recent review by the state government's Building Reform Expert Panel has said it will not consider cost escalation clauses to ease the burden on builders.
"That's obviously affecting our profitability, plus our cash flow," Mr Allen says.
"I was talking to a couple of the older, more senior builders form here about the mid-1980s. Their contracts then did have those (escalation clauses) and in Queensland in their contracts as well currently. It's not that you're renegotiating contracts, it's what you can do if there's a price increase out of the normal, so the builder can pass that cost onto the client. We're not asking for more profit on top of that."
Mr Allen says the current tradie shortage can be sheeted home to more than one cause. There is a huge number of tradespeople heading north to NSW and Queensland to assist in flood rebuilding, he says, and regional wages can't compare with those offered in Melbourne.
But the problem goes back to the closure of trade schools and the drive to have young people pursue a tertiary career rather than a trade in the 1980s and 1990s.
"There were a lot of kids who didn't want to go into a trade, weren't encouraged to go into a trade," he says.
"The ones now that do, they get the qualifications, but then they head off to Melbourne, to the bigger infrastructure jobs that pay better."
Another issue stalling builders is a high turnover of planning staff at councils, with an exodus of those staff to higher paid jobs interstate, and planning bottlenecks overall.
"I know the state government have mechanisms now, trying to fast track some of the planning," Mr Allan says.
"Then the planners can actually do their job where they need to do it, and avoid some of the stuff blocking planning. There's such a volume of work now , all these mechanisms can't keep up and there's not enough planners to do the work; not enough people in the system."
Mr Allen says it's time for the Victorian Building Authority (VBA) to lift its game with respect to rogue builders like LTR Construction and Goldfields Building Co.
"How that situation with LTR has continued is beyond me," Mr Allen says. "Every five years the VBA does a probity check to issue a licence, so it should have been stopped."
CLARIFICATION:
Regarding this story Building industry facing a hard future, which appeared in Saturday's edition of The Courier, Master Builders Victoria would like to add the following clarification.
The story looked at the difficulty faced by builders, the supply pressures and the financial challenges this has posed for many builders, including some local builders that have gone into liquidation.
But Master Builders Victoria sector group chair Stuart Allen would like to clarify that he did not criticise the Victorian Building Authority, LTR Construction or Goldfields Building Co.
In a statement, Mr Allen said he would never publicly criticise the VBA or discuss other builders.
In the development of this story, backgrounding information given to The Courier was mistakenly attributed.
If you are seeing this message you are a loyal digital subscriber to The Courier, as we made this story available only to subscribers. Thank you very much for your support and allowing us to continue telling Ballarat's story. We appreciate your support of journalism in our great city.
