Demand for new builds and renovations has risen nationally despite a slowdown in Victoria
Melbourne, Australia — Small residential builders in Australia continued to experience strong demand for new builds and renovations in the September quarter (Q3) of 2020 despite a COVID-19-related slowdown in Victoria, according to data from residential construction management software company Buildxact.
Buildxact’s Residential Construction Activity Report July-September 2020 shows that nationally, demand for new builds and renovations in Q3 2020 (July – September) has exceeded Q2 2020 (April – June).
Buildxact’s subscriber numbers rose by 21% in Q3, but that has been exceeded by growth in the volume of quotes. The volume of quotes in Q3 2020 rose by 31.7%.
Over July-September 2020, Buildxact subscribers quoted on $5.6 billion worth of projects, compared to a total of $3.91 billion in Q2 (April – June) 2020 – an increase of 42.7%.
This growth is not only good for the many builders, but the broader construction industry. Based on an average number of jobs won per small residential builder of 17%, the $5.6 billion of quotes over Q3 is expected to convert to $952 million of new project work. Of this, approximately 40%, or $381 million, flows through to hardware purchases.
“Hardware suppliers may see significant purchases orders in the months towards Christmas,” Buildxact CEO David Murray said.
Geoff Dahlsen, CEO of building supplier Dahlsens said, “For the most part, our builders are faring well during the pandemic, especially those in regional areas. The change to remote working has created a ‘flee change’ where people are fleeing the cities and moving to regional areas. Their money can go further here, so people are buying existing houses and renovating. The HomeBuilder grant has had a positive impact, and now the low interest rate has created more incentive for people to get into the market, so I’m confident we’ll continue to see strong demand for the next six months.”
The average value of quotes over Q3 2020 rose in July and August and hit a peak for the year-to-date in September, at $175,711.
The win rate and average number of jobs won per small residential builder has remained steady, with builders winning around 17% of jobs quoted. Further, profit margins rose in Q3 (three-month average 14.2%) compared to Q2 (three-month average 13.8%), reflecting greater demand.
Mr Murray said, “There’s so much demand out there that some small residential builders are being run off their feet. Our subscriber numbers continued to rise during the September quarter, but it’s still well outpaced by the growth in demand.
“As people have been restricted with domestic and overseas travel and are needing to spend more time at home, many are choosing to put their holiday budget towards renovations and home improvements instead.
“Growth in profit margin suggests that builders have sufficient work and are not under pressure to reduce prices. Profit margin is also helped by the fact that there is more demand for renovations than new builds. Renovations attract a higher margin,” he said.
John Peros, a small builder in NSW said, “We’ve seen a clear increase in demand during the pandemic, and we’ve won higher-value projects. I’m not sure why there has been such growth, but part of it has to come from people working from home. They are spending a lot of time looking at their home and thinking how they can make improvements. And because they’re working from home, it is easier for them to actually meet with us on site.”
After some COVID-19-related volatility early in the calendar year and an improvement in consumer confidence nationally, the average value of builder quotes has returned to and exceeded the historical averages from Buildxact data that we’ve seen of around $170,000. This may partly reflect take-up of the federal government’s $25,000 HomeBuilder grant to build a new home or substantially renovate an existing home.
Whilst growth overall has been healthy at the national level, Victoria had a down-turn in August as COVID-19 restrictions impacted the state. Whilst there was an improvement in September, the recovery wasn’t able to return to the July peak.
Glenn Longstaff, a high-end builder on the Mornington Peninsula said his business has seen a drop off in work.
“A lot of people put projects on hold because there was too much uncertainty. The HomeBuilder program hasn’t helped because the criteria does not cover the type of builds we do. However, while it’s been slow, it’s been a good opportunity for me work on the business and prepare for the future. I’m starting to hear back from people who initially put projects on hold, so I’m optimistic that next year will be busy,” he said.
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.
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