If you’re building a home or renovating at the moment, you’re probably feeling the pinch financially. This is because the building and construction industries have been hit hard by the pandemic.
Why are building costs rising in Australia?
There are a few reasons why construction prices have jumped so dramatically.
Firstly, the pandemic stripped Australia of thousands of younger and new immigrant workers. When borders closed, travellers on working holiday visas left to go home as soon as they could. While the numbers of backpackers and new migrants are now beginning to rise again, there is still a gap.
The lack of workers has resulted in labour shortages across many industries and construction is no exception. As reported by Infrastructure Magazine, it’s predicted there will be 100,000 unfilled roles by 2023. With so few hands and so many projects underway, skilled workers are able to push for higher wages. This means higher costs for employers and for customers.
The other issue behind rising building costs is the availability of materials. The pandemic created a shipping crisis, which saw huge delays in goods being shipped to Australia. Where project managers used to be able to rely on materials arriving on time, delays are now common. This causes timelines to be extended along with expenses.
People also decided to spend money renovating their homes instead of taking holidays during the pandemic. This led to many materials selling out and distributors putting the prices up in response to the change in demand.
Current building industry material shortages include timber, steel, kitchen materials, cement and electrical components. Housing company G.J. Gardner reported that the shortage is one of the worst in 40 years.
The other issue contributing to the rising cost of building is the weather. Heavy rain has caused a great deal of damage and diverted some companies to focus on emergency repairs. Fixing roofs and roads is often a priority, meaning others have to either pay more for building services or face a longer wait.
Rain also has the frustrating impact of delaying projects because people are unable to work safely outside in bad weather. This contributes to rising building costs because of drawn-out timelines.
Is your home insurance in line with rising building costs?
If you own a home or any substantial asset which is at risk of being damaged to the point where it makes sense to insure it, now is a good time to review your policy.
Read the fine print and you will see your home or investment is insured for a certain amount when it comes to replacement and rebuilding costs. However, if there is damage to the home that results in a claim, the amount you are insured for may not cover the costs. This is likely to be the case if you have had your policy in place for a long time.
Another thing to think about is emergency accommodation. With everything taking longer than usual in the building industry, if your home is seriously damaged you may find yourself in need of a new place to live while you wait for repairs to be completed. Insurers generally pay 1% and 12% of the building’s sum insured towards temporary accommodation, for a period of up to 12 months but it’s worth checking the small print of your policy.
The same applies for your landlord insurance if you have an investment property; speak with your insurance advisor and your property manager about how you would provide accommodation to your tenants in the event of a worst-case scenario and whether you have quality cover in place.
Give yourself and your family peace of mind by ensuring you have the right insurance on your home or investment property. Reach out to KO1 Insurance Brokers today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.