Home builder Rawson Group says higher energy-related costs will push up the cost of key materials such as bricks, concrete, steel, glass and aluminium even as cost inflation comes off last year’s 15 per cent surge.
A reduction in the shortages that drove unprecedented cost growth in the year to June would bring some relief to an industry facing “tough times”, Rawson managing director Nick Chandler said, but extra imposts in the form of energy prices threaten to push costs higher again.
How much more will they go up? Energy imposts are likely to push the cost of key materials such as bricks, higher. Kate Geraghty
Sydney-based Rawson, which last year ranked eighth in NSW in the Housing Industry Association-Colorbond Housing 100 list of home builders with 770 housing starts, was monitoring the risks of rising energy costs on those key inputs, Mr Chandler said.
“Over the last 12 months we’ve seen increases of about 15 per cent – possibly a bit higher – in the cost of building for us,” he said.
“What we would expect to see is half of that this year, with energy prices being the unknown. [That] could add another couple of percentage points to that total, depending on the timing of how that flows through.”
Home builders are on dangerous ground. Having been crunched by surging costs and fixed-price contracts that have given little room to renegotiate higher prices with customers, the business that relies upon quick completions has been further hurt by labour shortages and delays on site as a result of flooding, particularly in Queensland and NSW.
Rawson Group managing director Nick Chandler: “We think we’ve done a reasonably good job of staying close to the cost curve.”
That is clear in their accounts. Rawson Group’s latest accounts, for the year to December, show its net loss deepened to $15.9 million from $12.2 million a year earlier, as revenue from both home-building and land development fell.
The financial report also shows that the company received a $40 million loan from parent Daiwa House, Japan’s largest listed construction company, during the year.
Mr Chandler declined to talk about the support Rawson received from Daiwa, which acquired the business in 2017, other than to say he was “very confident” about the company’s ability to trade through the present conditions.
Builders such as Rawson’s Thrive Homes brand were now pricing new home contracts at 20 per cent more than they charged customers a year ago, he said.
“We think we’ve done a reasonably good job of staying close to – I won’t say ahead of – the cost curve,” Mr Chandler, who is the son of NSW Building Commissioner David Chandler, said.
“There are definitely some jobs in our pipeline at a margin below our target margin. But we’ve got a commitment to customers to deliver those homes.”
Separate figures from data provider Cordell this month showed home-building costs jumped 10 per cent nationally over the year to March – the most in more than two decades.
While shortages were beginning to ease, rising input costs such as fuel, freight and electricity costs were additional burdens that suppliers were now flagging, the report said.
Rawson rival NXT Building Group said at the time that rising electricity and gas prices had pushed up the cost of manufactured products and this would further strain cash flow of home builders.
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