Three months on from the start of the Middle East conflict, the impacts are hitting Australia’s construction industry hard, with development in Sydney’s west stalling as sky-high material costs make building new apartment blocks almost impossible.
A block of Parramatta apartments that began construction in 2019 has highlighted the severity of the crisis. Industry experts say if developers tried to start the same project today, it may not even exist.
WATCH THE VIDEO ABOVE: Western Sydney construction stalls amid soaring costs
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“It’s not really possible to deliver things in western Sydney at the moment,” Coronation’s Aras Labutis said.
“It’s really challenging to be able to build an apartment west of the inner west, Marrickville, Five Dock, Strathfield,” UDIA’s Stuart Ayres said.
New data has revealed the extent of cost escalation, finding a $100 million project that began at the start of the year would cost 4 per cent more now.
“When we consolidate all the factors, we could be heading to a period where we’re seeing escalation trend towards 10 per cent,” Newton Fish Group’s Steven Bregovic said.
The Middle East conflict is driving the Sydney construction industry to breaking point. Credit: 7NEWS Material prices are still climbing. Credit: 7NEWS Materials continue climbing in price across the board, from plumbing pipework to electrical cabling using plastic and copper, engineered wood products that need to be glued together, and excavation works using diesel.
“Anything that’s oil-related, there’s price volatility, but there’s also availability,” Decode Group’s Dominic Fussell said.
“Just simple things like delivery costs are increasing.”
To make one residential block in Fairfield viable, build costs would need to come in at around half a million dollars per unit, but the projected cost is closer to $650,000, above the suburb median unit price, so it’s now on ice.
“By the time we factored in the situation, it’s not financially sustainable,” Bregovic said.
Taxes and levies all add to the blow as well. The federal government says more reforms on red tape and regulation will come, but for now, there’s no immediate relief on the horizon.
“The future of western Sydney is certainly there, and there’s a need for housing, but right now it doesn’t work,” Labutis said.