The perfect storm for soon-to-be homeowners and those in the market for a new build has well and truly hit, with an increasing number of people experiencing significant delays or budget blowouts. Even with a fixed-price build contract in place, Australians are fighting an uphill battle to keep everything under budget and delivered as promised. The Institute of Public Affairs (IPA) reported that the time taken to build a house increased by 34% between the 2019-20 and 2024-25 financial years. On top of that, the iCIRT Construction Index: Capacity Report revealed that less than a quarter of active construction projects in the past year were delivered on time. One of the key reasons why build times are dragging out so much today, and why Aussies are becoming less trusting of building at all, is the increasing cost of construction.
Recent data from the Ray White Group showed that average building costs have increased by over 51% since 2019, making them far less affordable for those trying to break into the property market. That hasn’t been helped by external pressures like the ongoing Middle East conflict, which sent the cost of crucial plumbing materials soaring by as much as 36%. Of course, most lenders will require you to present a fixed price contract from your builder as a condition of home loan approval, so the overall cost won’t exceed that… will it? The unfortunate reality is that when costs exceed the price your builder agrees to, which can come about due to overcommitting to projects in your city or delays setting in, it becomes unprofitable for them to complete. Once that happens, construction companies can essentially hold buyers to ransom: either stump up more cash to get the build done or have it abandoned. There have been far too many instances of builders running out of money midway through projects, leaving couples and families with incomplete houses and taking their money down with them.
The other side of the coin is the fact that these budget increases are so difficult to manage for a large number of people, with even a project cost increase of 1% to 5% enough to temporarily or indefinitely pull the pin on a home build for 35% of Aussies, according to Equifax. For projects that exceed original estimates by 15% or more, only between 5% and 7% of Australian homebuilders or renovators are equipped to manage the revised cost. Carefully planning out and budgeting for builds or renovations is crucial if you find yourself without much room to move with your savings. That means mapping out all the fixtures and fittings required for the home, the cost of building your driveway and any landscaping required. While this is important for those building their home, it’s even more crucial for builders, who can find themselves in a spot of bother due to inadequate construction timelines and loose costings.
“Young singles, couples and families looking to get into their first home via a new build need to take extra care to avoid overburdening themselves with debt,” Savvy Mortgage Broker Daniel Carter commented. “A detailed, itemised budget is one handy way to help you do that. Locking yourself into a contract at the absolute limit of your financial capacity also leaves you open to stress, so leaving a bit of extra space opens up your options in the event of budget blowouts. You should also double check what’s included in your contract, as missed items like driveways, landscaping or drainage could cost you tens of thousands.”