Are material prices coming down?

If I had a dollar for every time, I'd been asked that over the last year, I'd be putting away my trowel and picking up the fishing rod!

And I'd love to give you a positive answer, the light at the end of this tunnel, but it does neither of us any good if I'm not giving it to you straight- things are going to get worse before they get better.

Steady rises since 2020

There has been a steep increase in demand for building materials for a few years now.

The Government's Homebuilder Grant was designed to stimulate the construction industry, and it did just that. Interest in new builds and vacant land shot up, and although its effects have now faded, hot on its heels came the spike in demand that followed the easing of Covid lockdown restrictions.

The rise in demand pushed up prices, and in 2021 we felt it most: timber rising by 50-100%, steel by 30-60% and concrete by 20-40%.

So prices have risen, and the industry has struggled to meet the demand.

Then came the recent floods in Queensland and NSW, and the war in Ukraine.

Impact of floods and Ukraine invasion

The devastation from the floods destroyed 5000 homes and left thousands more needing urgent repairs. Subcontractors- from plumbers to electricians to tilers and roofers- have been called in from all over the country to help the effort.

With Russia being one of the country's largest suppliers of timber, the conflict with neighbouring Ukraine has seen huge knock-on effects on the global supply chain and shipping.

The result? A perfect storm of even more demand on an industry creaking under the weight of increased demand and less supply to service it.

Schedules and budgeting

With the sector blindsided by the labour and material shortages, schedules have been packed, yet ever subject to change, with the erratic supply of materials only making a bad situation worse.

It feels like every day for as long as we can remember, we've been the bearer of bad news to our customers, either with delays or escalating costs.

And it's likely to continue into the second half of 2022...

"After the current surge, we don't expect costs to just drop back to where they were previously," Macromonitor director Nigel Hatcher said.

"Rather, costs will continue rising from the new, higher base, albeit at more normal rates of increase."

"We expect growth in costs of 2.4 per cent in the year to June 2023 and growth of just 1.3 per cent in the year to June 2024. Beyond that, we expect average annual cost inflation of 2.1 per cent per year through to 2031 (Australia: Financial Review)

The 'new normal', but (thankfully) the rises will slow

So, unfortunately, these price rises are likely here to stay.

That's not the conclusion you wanted to hear, and it's not the one I wanted to give you.

The one saving grace is that we are over the worst of them- there will be slight rises as the year meets its close, and then they will fall back in line with inflation.

Here's hoping for no more big surprises in the meantime...