Q1 has seen Australia’s housing pipeline continue to taper off, with new dwelling approvals down compared to Q1 last year as industry pressures and interest rate rises dampen demand. Ongoing supply constraints, material price hikes and labour shortages continue to result in delayed project timeframes and slimmer operating margins for builders.

Key considerations for clients for the new quarter (FY23-Q2)

Builders will continue to be challenged by rising costs, and a shortage of materials and labour. As such, homeowners and banks will be wary of the potential for cost blowouts. Insolvency and industry analysts believe small and medium-sized businesses will be most vulnerable in the coming year, crunched between fixed price contracts, rising costs of materials and labour, as well as supply chain and interest rate pressures.

For builders, the fundamentals continue to be important, including:

  • Minimising downtime via strong project planning that supports primary construction as well as other downtime tasks
  • Maintaining cashflow, including managing debtors / owed monies, streamlining administrative processes to reduce lags between payments, and careful timing of payment versus job progress
  • Considering financial options through a finance professional to help manage costs and regulate cash flow

From an insurance perspective, it is important to regularly check in with your broker to ensure suitable coverage is in place and you are making the most of funding options, if this is right for your business.

For those building or renovating, it’s important to ensure your builder has a valid builders’ warranty certificate for your build, which protects you in the event that your builder becomes insolvent, disappears or passes away. Whilst this is a mandatory insurance policy, the rising costs for builders mean the risk of a doctored certificate is a genuine possibility. If you are unsure, contact the Insurer listed on your certificate directly. It is important to ensure all the details on the contract and certificate are correct and match one another exactly before signing the contract and paying a deposit.

Any industry trends you can see arising/developing over FY23?

We expect to see further scrutiny and tightening around builders’ eligibility, which largely determines the size and number of jobs a builder can do at any one time. This means it is important for builders to work closely with their builders’ warranty broker, such as BRIC, to help navigate the current industry challenges, and support sustainable business growth.

It’s timely for builders to review their current and future risks with their broker, who can also provide insights into emerging risks in the market. For example, cyber security in construction needs to be considered if more of your operational infrastructure is moving online, to help reduce the risk of theft or compromised personal or commercial in confidence data.

The industry is keen to see some easing of labour shortage pressures in response to the Government’s recent reopening of the immigration gates, which many are hoping the warmer months will bring.

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BRIC, as a company of Honan Insurance Group Pty Ltd is now fully owned by Marsh Pty Ltd. To find out more, speak to your broker or read the announcement