Costs across the construction sector nationally are beginning to cool, but in the ACT the building game is still a battle.
National construction costs have eased to 0.5 per cent growth in the second quarter of 2024, the Cordell Construction Cost Index shows.
Yet they remain about 30 per cent higher than pre-pandemic.
Combine that with rising interest rates and limited loan ability, and you have the "perfect storm" for a year of pressure on the industry, CoreLogic's research director Tim Lawless said.
"I can't think of any winners here ... I don't think there's anyone raking it in on the side," he told The Canberra Times.
"Even though costs are rising at a much more gradual pace now, it means builders' profit margins have been substantially compressed if not eroded completely, which makes it very hard to deliver supply into the marketplace."
Less for materials, more for labour
Mr Lawless said he had seen the cost of actual materials - particularly steel and wood - come down slightly, but still not to pre-pandemic levels.
An additional concern for companies now was wage growth, with low unemployment in the sector and resulting high wages.
"The last five years have been a real rollercoaster ride for the residential construction sector," Mr Lawless said.
"It's been characterised by a series of supply chain disruptions, labour force constraints against a backdrop of very strong demand."
Sector uncertainty may drive up price
Brad Crockford, who owns Tuggeranong-based renovation company Rockford Property Solutions, believed uncertainty around costs was causing some companies to put prices up as a safeguard.
As a smaller company, he said he was able to work closely with his clients and contractors to keep costs down and quote customers accordingly.
"This means I am able to provide the work to [customers] for a little bit cheaper and still make money," he said.
The key to ensuring contractors did not lose out was pricing realistically, Mr Crockford said.
"Canberra is a very word-of-mouth place," he said.
"You don't become successful and comfortable overnight."
Mr Crockford planned to renovate his own property later in 2024, and was confident he could interpret the market well enough to maintain stable costs.
He had noticed, however, some Canberrans were feeling the pinch around prices.
He said many clients could no longer afford the quotes they were given, even at the lowest end of the margin.
Two other building companies, who did not wish to be named, told The Canberra Times they were now seeing only a 50 per cent success rate from quotes given to clients, down from about 80 per cent in 2018.
Pipeline clearing
Mr Lawless said hope was in sight despite pressure on tradesmen from almost every angle.
Construction costs are rising at their slowest pace in 20 years, CoreLogic figures showed.
"There is still quite a pipeline of approved and not completed [work] to move through the construction pipeline," Mr Lawless said.
"Once that has started to move through, we should see the sector freeing up a little bit."
He expected this to take about 12 months.
Housing Industry of Australia economist Maurice Tapang warned too much slowdown in work could mean layoffs in the construction industry.
"It wouldn't be very surprising to see an increase in unemployment and employers letting people go," he said.
That may come in the form of "some easing in staff headcounts or the number of hours worked".
"It's a lot harder to rehire and retrain a new worker than it is to retain someone," he said.
Insolvencies were up 35 per cent in the ACT in the 12 months to March 2024, Australian Securities and Investments Commission figures revealed.
Renovations on the rise
Mr Tapang said if the cost of buying an existing home in the territory continued to climb, home owners were likely to turn toward extensions and new builds.
Currently the cost of land and construction comparative to existing dwellings in capital cities made it harder to entice an ACT market to build.
But he felt this could change in the next 12-18 months.
