Buildxact’s Residential Construction Activity Report April-June 2020 shows that there is strong demand for custom-built home projects and renovations. Although competition in the sector has intensified, many small builders are winning new work, albeit at a slightly reduced average value per project. Margins are healthy.
One of the key observations from the first edition of this quarterly report is that the COVID-19 pandemic had no significant impact on small builders in the residential housing sector over the June quarter, according to the data.
David Murray, CEO of Buildxact said he expected a significant impact on the work being quoted and won by Buildxact’s builder customers when the COVID-19 crisis began. However, that has not happened. One possible reason is that people are spending more time at home and thinking more about undertaking renovations or knockdown rebuilds.
(Download the report _Buildxact_report_2020_final)
“Buildxact’s data indicates there has been a major increase in quoting activity by the small residential builder since the COVID-19 restrictions began in March. The volume of quotes by small builders has increased and margins are steady, which makes for a relatively upbeat outlook for the residential builder,” says Mr Murray.
“Our data shows that demand has not dropped off over the reporting period. Builders are still quoting work. The volume of quotes in June 2020 was up more than 25% (actual: 28%) compared to the volume of quotes in March 2020, and total quote values rose by 29% (June versus March). While our subscriber numbers have grown also during that period, it would not account for that much of an increase, which tells us there is still a lot of demand out there.”
Following the implementation of COVID-19 restrictions in mid-March, the total number of quotes fell in April. However, volumes picked up again in May and June to levels well above what they were in March. When comparing the April-June 2020 quarter to the same period in 2019, the average volume of quotes per builder has increased by 10.7%.
Over April-June 2020, small builders quoted on $4.01 billion worth of projects, compared to a total of $2.19 billion over the same three-month period in 2019—an increase of 83%. While growth in the Buildxact subscriber numbers contributed a little to this increase, the main driver of growth was increased demand.
“Demand is high, particularly for renovation projects. Builders are very busy quoting to secure a pipeline of projects to deliver, and with the average project over $150k, this work will run for many months.” says Mr Murray.
Leigh Wallis, Managing Director of Smith and Sons Renovations, a franchise of 86 small builders across Australia and New Zealand agrees.
“In mid-April, renovations inquiries took off exponentially. Obviously, some people are just tyre-kicking. But people are stuck at home and are looking at their four walls, wondering ‘What can we do to improve the home?’ The other a part of it is that some people may have had a go at renovations themselves and now need a tradie to fix up their mistakes. The other thing is that since COVID-19, people have got money that they may have intended to use on travel, but that’s now off the cards. They’re quite happy to spend that money on renovations,” he said.
“I think we have fared quite well during COVID-19 compared to other sectors. For the next three months, if inquiries keep going the way they are and we don’t get another resurgence of COVID-19, I think we should get through it,” Mr Wallis continued.
Assessing the impact of HomeBuilder
The federal government’s $25,000 HomeBuilder grant announced in early June has helped boost the number of quotes, with quotes up 11% between June and July.
The strong demand for renovations and custom-built homes continued over July 2020, with the total value of all work quoted growing to $1.62 billion. In February 2020, the value of all work quoted was $1.1 billion.
“So, over the course of COVID-19, we’ve gone from $1.1 billion to $1.62 billion—massive growth,” says Mr Murray. “We’ve not had that level of growth in the period previously.”
However, the grant is yet to have an impact on jobs won.
“Builders are telling me that they were very busy beforehand, and now they are quoting on projects with the government grant, but they haven’t necessarily started those projects yet,” says Mr Murray.
The second COVID-19 lockdown in Victoria is expected to have a minimal impact on small builders because the size and nature of the projects on which they work requires fewer than five people on site.
About the Report
Data from the Buildxact report is drawn from thousands of builders across Australia who use Buildxact’s job management and job estimating software.