It’s been 75 weeks since Perth couple Cassie and Julian Kirtisingham signed a contract to build a five-bedroom, two-bathroom house in the city’s southern suburbs.
- Stimulus grants created a boom in the construction industry
- But the industry has failed to keep up with demand
- It has left many families facing longer wait times and price increases
Like many new home buyers, the couple signed up in late 2020 so they could take advantage of $20,000 WA government and $25,000 federal government stimulus grants designed to keep the construction industry alive during the pandemic.
The slab was laid in September last year, allowing them to qualify for the grants, and this was followed by the lower level of bricks in December.
But, as Ms Kirtisingham has documented on an Instagram account illustrating the realities of building a home in the current Perth market, there has been no building on their block since.
“Sadly, even though our timber has been sitting there for six weeks, we are at nearly 72 weeks and no work has been done since early December,” she posted in early April.
Yet since they signed their contract, the couple said their builder had given them two price increases, two contract extensions and had notified them of another.
Cost of building home in Perth jumps 16 per cent
Theirs is not an unusual story in Perth’s overheated residential construction market, where the inflation rate is the highest of any capital city in the nation and the cost of building a new home rose by almost 16 per cent in the first quarter of this year.
In WA, the home-building industry is tightly regulated, including the widespread use of fixed-price contracts.
Since many contracts were signed to qualify for the 2020 stimulus grants, the costs of building houses has risen sharply and is pushing many builders and new home buyers to the financial brink.
These cost pressures are caused by many interwoven factors, including shortages of building materials affected by global supply-chain problems and the Russian invasion of Ukraine.
The shortage of skilled labour in WA caused by state and international border closures and a housing construction industry — unprepared for high demand after many years in the doldrums — have also contributed.
Stimulus payments had ‘unintended consequences’
In April, two WA building companies, Home Innovation Builders and New Sensations, had liquidators appointed, leaving some customers with half-built homes.
It’s a situation which Urban Development Institute of Australia chief executive Tanya Steinbeck calls one of the “unintended consequences” of the building stimulus payments, which met their goal of creating a pipeline of works and protecting workers’ jobs during the pandemic but also creating a booming level of demand.
“It did its job and then some.
“It’s just what has happened since then nobody could have anticipated.”
The impact of the stimulus in WA was particularly strong because the state government also offered grants, unlike those in bigger states like NSW, Victoria and Queensland where only the federal HomeBuilder grant was available.
WA government inundated with applications
New entrants to the housing market could also access the $10,000 first home-buyers grant as well as stamp duty concessions, meaning a benefit of almost $70,000.
The grants were announced in early June 2020, early in the COVID-19 pandemic when a crash in house prices was predicted, and had tight time frames, which were later extended.
WA government financial documents show more than 19,000 applications for its Building Bonus were submitted by the end of January 2021, with about 14,000 of these received in December 2020.
“It was something we did not anticipate and were not prepared for because we were coming into that space from five years of historic lows, so we did not have the workforce to be able to cope with such a sudden increase in demand.”
Family faces another year in cramped quarters
While the Kirtisinghams said they were grateful for the government grants, the delays to their project have cost them and, like other borrowers, they are also looking at a likely interest rate rise soon.
“But we know other people that have longer delays and had [bigger] price increases than us,” Ms Kirtisingham said.
They expect to spend the next 12 months paying rent, a mortgage and utilities bills on two properties, while living in a small space with three-year-old Ruby and baby Chloe.
“We signed before I was pregnant with our seven-month-old,” Ms Kirtisingham said.
“We rented a two-by-two apartment thinking surely by February  it will be done by then, but we still have a seven-month-old in our bedroom because we have no other bedroom.”
Tradies can’t keep up with demand
On the other side of the equation, many tradies – like bricklayers and carpenters – can’t keep up with the demand for work.
Bricklayer Adam Ciccarone, a contractor for a residential building company, said he had a four-month backlog of work, which was welcome after some tough years.
“The last five to six years when it was quiet, it was the worst we’ve seen it,” he said.
“But this is definitely the busiest but it’s only busier, I reckon because of the lack of tradies, lack of bricklayers that have come through.”
Mr Ciccarone said some bricklayers were now being paid between $2.80 and $3.50 a brick, compared to prices like 75 cents about five years ago.
“I could see this day coming when the rates were going to come up because I could see no apprentices were coming through, bricklayers were leaving,” he said.
But he is worried about whether some builders will be able to survive the escalating costs and shortage of tradespeople.
“I don’t think I’ve seen a boom where builders have gone bankrupt, closed up, because they can’t afford to pay tradies and bills like now,” he said.
“To be honest, I don’t know how a lot of builders are surviving at the moment.”
Grants saved jobs, minister says
Housing Minister John Carey said he acknowledged there were significant challenges, with the WA Government looking at extra protections for residents hurt by builders’ insolvencies.
“We’ve seen the renovation industry go through the roof because people are investing in their homes because they couldn’t travel,” he said.
“We’ve seen an increase in net migration back to Western Australia so there has been this demand for housing.
“Then we get supply chain issues kicking in. So all of those sorts of issues coming together is resulting in more demand for housing and cost escalations.”
Mr Carey also said he believed the grants were warranted, given the grim predictions about the economy in the early months of the pandemic, and had saved jobs in the sector.
“So I appreciate we’re under enormous pressures but I’d still rather be dealing with these problems than the alternative scenario.”
Policy came in ‘fast and furious’ with ‘zero consultation’
In a report on the impact of COVID-19 housing policies, the independent Australian Housing and Urban Research Institute said the fast introduction of the WA and federal grants was “commendable” but “generated a number of unforeseen outcomes”.
“These outcomes, particularly regarding material and labour shortages, cost increases and project delivery time frames, were largely due to the unanticipated level of demand for grants and the design of the HomeBuilder scheme itself,” it said.
Some of the housing and finance industry members interviewed for the report suggested the schemes may have worked better if there was broader consultation before they were introduced.
“It came in fast and furious, but it came in with zero consultation between the federal and state government,” one finance representative said.
“So why does that matter? It means you had a policy in place that wasn’t ready to be implemented.”