Why is Renovation so Crazy at the Moment?

Things have been a bit crazy in the home renovation world lately. But you probably know that!

It has been a tough two years for the construction industry. An overheated market, material and product shortages, extreme pressure on trades, and big price shifts. One word: COVID. I thought I’d shed some light on some of the things that are going on, to help you understand more about what’s going on ‘behind the scenes’.

Price Increases

Timber costs have skyrocketed almost 200% since the pandemic. Usually a stable resource, fresh timber’s international prices have hit unprecedented heights this year. It’s a combination of Covid-related shipping delays and high demand for new home builds in major markets such as the United States and Europe.

There have also been big increases in the cost of steel, plastic, fabrics and packaging. Which then brings up the prices of any products made with these materials. A low AUD/USD conversion rate has caused price increases too. Yep, headaches everywhere!

Lockdown Complications

We all know a lot of businesses had to lockdown, especially at the start of the pandemic. This happened all around the world, which contributed to price increases. In Australia, lockdowns meant builders and trades couldn’t get on site. The rules limiting the number of people on site also caused delays because work slowed down even more.

Timelines are of course effected. The pressure on builders has been immense. Builders who quoted on fixed priced jobs find themselves in a pickle because the cost of delivering that job has unexpectedly increased. Building jobs are usually quoted using standard processes, but when the process gets changed around a lot, the whole thing gets out of whack. 

Supply vs Demand

During the pandemic, the demand for new houses quickly outstripped supply. Many people bought new homes, spurred on by low mortgage rates, the ability to work from home, and of course, needing your own space amid a raging global pandemic. Many people who still had jobs found they actually had extra money – they weren’t spending it on travel or going out – which added to the boom in home renovation.

It’s not just renovations, it’s everything. All over the world there have been dramatic shifts in consumption during the pandemic. People stopped spending on restaurants, movie theatres and travel, and redirected this money to buying record amounts of imported clothing, computers, furniture and other goods.

Shipping Issues

Shipping has also been thrown right out of whack with the pandemic. The cost of shipping a container of goods has nearly tripled over the past year. Ports all over the world have been closed and opened at various times during lockdowns, with workers subjected to lockdowns too. All this disruption causes delays, that cause blockages, that cause even more delays, that cause price rises, and around we go again.

And I shall give an honourable mention to that ludicrous clogging of the Suez canal by the container ship ‘Ever Given’ in March 2021. I found that story really amusing, but boy did it play havoc with the world’s supply chains! 

Product Shortages 

Aside from shipping problems, another issue is some big global manufacturers are currently not selling some building products to the Australian market. They’re just not available. It’s not only furniture, it’s also some building products and supplies (eg. certain tiles, claddings, or tap ware).

These manufacturers are instead focusing on the European and American markets, which are larger than Australia. They are struggling to keep up with demand, so are focusing on products and regions that make them money. Especially given that shipping costs to Australia are really high right now. All of this means that sadly, the Australian market just isn’t their priority right now.

What Can You Do?

As you can see, it’s a bit hectic out there! But it’s not all doom and gloom. I believe things will settle down, it’s just unclear when.

Now is the time to be even more communicative with your builder. Trust is very important. Ask lots of questions to get a sense of what will effect your renovation timeline or budget. Chances are your builder is struggling with the complications and uncertainty too. Some builders have been absorbing and integrating costs, however this is not sustainable for them. Think of your builder as part of your team and you will be able to work through the challenges together.

Plan ahead but also be prepared to be flexible. This has always been my mantra for renovating but now it’s on steroids! You may not be able to have that kitchen bench or tapware you love; it’s just not possible if it isn’t in the country. So be prepared to choose another one.

Choose local suppliers. Materials and products that are in stock – it’s a no-brainer. Shop at suppliers that keep lots of stock. Products made in Australia are a better bet too. Support local as much as you can.

The last thing is, be patient. Sounds boring but this is the reality right now. Be understanding of changes in a constantly changing environment. Be patient with your builder who is trying to manage changing rules and difficult circumstances. Unfortunately hold-ups and complications are unavoidable at the moment, so they need to be factored in.

Why do People Underestimate the Cost of Renovating?

Guesstimating budgets is common with renovations. We have to, otherwise we couldn’t even start. But so often people lowball their renovation budgets, which is where problems lie. They have the best intentions but underestimate the costs, and by a lot! Even as a designer I sometimes find I’ve underestimated things. 

I don’t mean to scare, quite the opposite. I want to help you understand so you can feel more confident. If you’re aware of the traps then you can try to avoid them. So here are some reasons why I think this happens.

What Your Friends Say

Friends talk to friends about their renos all the time, especially if you ask. The problem is this can give you false confidence. You’ve probably heard it: “We bought the house only five years ago for $1.5 million and now it’s worth double that!” Beware, this kind of comment doesn’t give you the full picture. They probably left out things like stamp duty, council application fees, or the fact their brother is a builder!

I don’t believe people are trying to mislead you, they’re just rounding out the numbers. Renovating is a long game and it’s human nature to forget some of the hassles and costs. Plus, your friend is probably proud of their hard work and results, as they should be. But it’s no surprise it gets romanticised a bit.

By all means, talk to people about their renovations, it’s a great way to gather broad information, but always take it with a grain of salt.

Renovation Shows

It’s all for TV people! It’s not real life! The timelines and budgets are ridiculous. It’s great entertainment, but it’s a long way from real renovating.

Contestants get a lot of support from companies that want to be featured: sponsors provide trades, suppliers give them discounts, and companies donate products. The budgets aren’t real because there are a lot of contra deals. And don’t forget the TV network doesn’t want them to fail.

You can watch these shows for design ideas and inspiration (and of course the drama) but do not think your renovation budget will be anything like theirs!

Planning

Okay, this is a simple statement but it’s a big issue. You have to do a lot of research and careful planning if you want estimate the cost of your project reasonably accurately.

To help your planning, I suggest building a relationship with a builder early. Ask them to look at plans in the initial design stages, rather than at finished plans. This way you find out if your project is in the right budget ballpark before falling in love with it. Don’t put time and money into finished drawings until you know you can afford to build it.

Architects and designers will do their best to work within your budget, but they aren’t the ones building it, so don’t solely rely on them for accuracy. Talking to builders along the design journey is also a good way to meet them, get to know them, and develop a relationship. Getting help from the right professionals early on will help your budget stay on track. 

Things You Can’t See

It’s easy to create a spreadsheet that lists all the pretty things, like tiles, taps, bench tops, pendant lights. The things we can see are easy to understand. It’s the cost of the ‘unsexy’ parts that typically get underestimated. Replacing plumbing, installing insulation, fixing stormwater drains, re-pointing the roof, hiring scaffolding. I think you get the idea: these things often get missed in a budget.

The problem is, if you aren’t an experienced renovator, how do you budget for the things you don’t know about? This is where a good builder comes in. They will let you know all the extra stuff that needs to happen and help you understand why.

It helps so much if you can develop a good relationship with your builder so you can get advice along the way. And ask lots of questions. A good builder will be happy to talk you through. Then you will feel confident you’ve covered all the important (and expensive!) stuff in your budget.

Rose Coloured Glasses

People are so wonderfully optimistic. Which is a good thing, otherwise we wouldn’t ever take risks, but it can cause issues if you’re budgeting for a renovation. We all hope and pray everything goes according to plan. I say this in the nicest possible way: it won’t.

Sorry to be a bummer, but it’ll be far less stressful if you accept this from the start. Even if it weren’t for lockdowns and border closures, things in your renovation will change: it might be stalled by weather, or there’s a delay in deliveries. Perhaps a pipe system fails, or a wall you were going to keep gets destroyed. Work on older buildings in particular can have a lot of unforeseen events. You never know what you’ll get when you open up that old wall.

People often believe these things won’t happen to them, so they don’t budget for it. But something will happen, so always add 20 percent to what you think a project will total when budgeting. And expect the unexpected.

Conclusion

Renovation is full of surprises, but it’s not a good feeling when it’s your budget doing the surprising. Do your research, do a lot of good planning, get advice from professional contractors, and allow for a spare chunk of money.

It’s so important to have a good working relationship with your builder. Get them involved early and invested in your project. A good builder can help you understand your project budget deeply. After all, they’re the person who has to build it, and they can’t do that if you run out of money.

Should I Tell the Builder My Budget?

People often ask if they should tell a builder their budget right from the start. Whether it’s a big project or a small one, my answer is always YES! And this goes for working with a designer or architect too.

Your Fears 

Sometimes it’s hard to talk about your project budget. I get it, I really do! As a designer I sometimes find it awkward too. The big fear people have is really common: if you tell the builder the budget, they’ll go and make sure they spend it all! This idea that you’re giving away your competitive advantage. Some people wonder if they could get it for less if they say they have less to spend.

But…

But builders, architects and designers need to know your budget. And they should know it right from the start, when you first meet them and start talking to them. It doesn’t mean you’re stuck with that amount forever, your budget can change, but it’s best to be as honest as you can from the start. I’m going to talk you through why this is a good idea.

The Right Fit

There are a lot of different renovation professionals out there, which means plenty won’t be right for you. You can spend $1000 per square metre or $6000 per square metre – there’s a big range! Some builders are keenly dedicated to the the finest, most luxurious, custom details, and others are good at getting your house done efficiently.

Builders also work in different ways. Some only take on one or two projects per year, some work with specific suppliers, some will only work in certain areas, and may charge a premium if you’re out of area. Talking about your budget helps your builder work out if your project will fit in to their business model. And you get to figure out if they’re right for you too. So, by talking about your budget from the start, you both save time figuring out if you should keep talking.

Budget vs Dreams

Do you want champagne on a beer budget? Don’t worry, it’s pretty common. We wouldn’t be human if our dreams weren’t bigger than our wallets. Builders need to see if you have realistic expectations about the cost of your project, and talking about budget is the best way to do this. I often talk about compromise and how it’s a normal part of home renovations. A big part of building/renovating is working out what you can do within your limitations.

So, it’s important for your builder to know how much you can spend because they can help educate you about what can be done for that price. Builders are often really good at figuring out how to get the most bang for your buck. You’ll get a better quality feedback, and a better result, if you’re honest about your budget upfront, which saves everyone time.

Remember, it’s okay if your budget changes as you come to understand more about what your money will get. I see it all the time. Once homeowners start talking, the designer and/or builder has to educate them about what they can actually have. But this isn’t possible if you don’t tell them your budget.

Are You Ready?

Building or renovating is never quick. A builder has to organise projects that go for many months, maybe years. There are a lot of pieces that need to fall in to place, so builders are booked up well in advance. Not to mention there’s a shortage of skilled trades in Australia at the moment. So, a builder is trying to understand when they might be starting your project and whether it will fit into their schedule. Talking about budget gives them a sense of whether you want to start in six months or six years.

The way you talk about your budget will help too. Some people start talking to builders when they have a full set of council-approved drawings, while others start with just a few ideas. Usually those who have drawings will have done a fair bit of investigation, eg. spoken to real estate agents to get a sense of value in the area, talked to the the bank about refinancing, talked to council about approvals. All this gives the builder a better sense of your timing.

Trust

Renovating or building is a long process, even before the builders start on site. So you want to work with people you TRUST, people you feel you can communicate with. It’s no good to be half way through a project feeling uncomfortable about asking questions, or feeling like you don’t understand what’s happening next.

If you talk about the budget up front, you’re developing a level of trust that’s so important during a build. Showing you’re prepared to talk about budget builds trust and enables your builder to help you with managing how much you spend. And, talking budget upfront makes money-talk more comfortable the whole way through.

Summary

Share your budget up front. Be open and honest about it. This way your designer/builder/architect can work WITH you to get the best outcomes. You’ll get the best advice this way, and save everyone time and energy.