Small residential builders thriving despite pandemic

Small residential builders are overcoming and the deleterious economic effects of COVID-19 on the Australian economy, with the sector experiencing strong demand for new builds and renovations in the September quarter (Q3) of 2020.

Buildxact’s Residential Construction Activity Report for the period July-September 2020 reveals that the volume of quotes grew by 31.7 per cent in the quarter, which is equivalent to $5.6 billion worth of projects. In comparison, the value of projects during the previous quarter was at $3.91 billion, which meant that there was an increase of 42.7 per cent in project value in Q3.

The report also noted that 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 remained steady, with builders winning around 17 per cent of jobs quoted. Profit margins rose also in Q3 (three-month average 14.2 per cent) compared to Q2 (three-month average 13.8 per cent), which reflected greater demand.

“Hardware suppliers may see significant purchases orders in the months towards Christmas,” Buildxact CEO David 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,” Murray added. “Growth in profit margin suggests that builders have sufficient work and are not under pressure to reduce prices.”

Murray emphasised the fact that small builders’ profitability is being helped by the fact that there is more demand for renovations than new builds, with renovations attracting a higher profit margin.

Geoff Dahlsen, CEO of building supplier Dahlsens, said that COVID’s impact on working practices is actually benefitting small residential builders in regional areas.

“The change to remote working has created a ‘flee change’ where people are fleeing the cities and moving to regional areas,” Dahlsen explained. “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.”

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