House builders

PHOTO:  Some builders were forced to walk off the job earlier in the year because they had no materials. Credits: Video – Newshub; Image – Getty Images

Housebuilders are being deterred from offering fixed prices on jobs by escalating prices and critical shortages of materials.

Mortgage brokers are now finding escalation clauses cropping up in contracts to allow for material prices to rise; they say banks favour fixed price builds, so getting a mortgage could become harder.

“To me, it’s uncharted territory – I haven’t seen this before,” Paulette Trotter, who’s been in the finance industry for three decades, said.

The situation is exacerbated by the pandemic choking the supply chain north and south of Auckland, so severely some builders are having to down tools.

Mike Blackburn of Canterbury’s CBS Construction Co-op is hearing of the pressures on their 600-plus tradie members.

“I had an email this morning from a builder who said by [Monday] afternoon, it’ll be tools down for them, they simply don’t have the building materials to carry on working,” Blackburn said.

Demand was already sky-high as rocketing consents fuelled construction cost inflation of 4.5 percent annually as of June – before the lockdown hit and made it worse.

Blackburn said that presents an “enormous challenge” to quoting a fixed price – until now the standard approach for building new homes.

Stephen Voyle, a principal at Context Architects, said one approach was to fix the price of early work, say for foundations, or for only the early half of a project.

“We can’t find anyone to give us a fixed price anymore,” he told a recent construction webinar.

“Projects are two years long, and it’s just impossible.”


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♬ original sound – Property Noise Group

Master Builders chief executive David Kelly warned in the same webinar against “not being talked into” a fixed price job.

“You don’t know what’s going to happen,” he said.  “Clients will want a fixed price, I understand that. Builders like to help people.