COVID-19 has impacted the residential construction sector in the months since pandemic-related restrictions were imposed in March.
However, somewhat counter intuitively, data collated from Buildxact’s residential construction software shows that there is strong demand for custom-built home projects and renovations across Australia.
When the COVID-19 crisis began, Buildxact expected a significant impact to the work being quoted and won by its builder customers. However, 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.
Buildxact’s subscriber numbers have risen in the three months since the end of March 2020 by about 17% but have still been outstripped by the volume of quotes indicating overall growth in the sector.
The volume of quotes in June 2020 rose by 28% compared to the volume of quotes in March 2020, and total quote values rose by 29% (June versus March).
The volume of quotes over April-June 2020 totalled 25,900 compared to 12,779 in April-June 2019—up 102% the average volume of quotes per builder has increased by 10.7% in the April-June 2020 quarter compared to same period last year.
Over the same April-June 2020, subscribers 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%.
The increase in the volume of quotes is related to the fact that COVID-19-related restrictions have forced more people to stay at home, which is driving greater consideration of renovations and home improvement.
April, May and June of 2020 all recorded significant increases in quote value. April 2020 totaled $1.18bn versus $632m in April 2019 (up 87%); May 2020 totalled $1.34bn versus $796m in May 2019 (up 68%); and June 2020 totalled $1.48bn versus $760m in June 2019 (up 95%).
Comparing Q2 2020 to Q1 2020, renovations showed the strongest growth, up 37.3%. New builds rose 36%, and other work was up 15.4%.
Renovations also showed the strongest growth when compared to the prior corresponding period, up 107.6%. New builds rose 93.1%, and other work increased by 100.5%.
Most quotes by number, in both Q1 and Q2 2020, came from Victoria, followed by NSW and Queensland. That pattern has remained consistent over 2019 and 2020.
However, in Q2 2020 versus Q1 2020, NSW had a higher growth rate of 34.7%, compared to Victoria’s 28.4 % and Queensland’s 25.4%.
Tasmania recorded growth of 33.6%, South Australia 19.7%, Western Australia 12.2%, ACT 18.9% and Northern Territory 186%.
Victoria also leads the way in total quotes by value, again followed by NSW and Queensland. However, in terms of growth, NSW (35.4%) again outstripped Victoria (24.8%), comparing Q2 2020 to Q1 2020.
Data collated from Buildxact’s residential construction software 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 in these areas, albeit at a slightly reduced average value per project.
Managing Director of Smith & Sons Renovations and Extensions, Leigh Wallis says inquiries for renovations fell by about 10%, following the implementation of COVID-19 social restrictions in mid-March 2020 and were down 23% by the second week of April.
“In mid-April, renovations inquiries took off exponentially,” says Mr Wallis.
”In May, leads totaled about 850. In June, it was 1,300. 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.”
Mr Wallis says the number of jobs secured fell dramatically in April 2020 but have since surpassed the level in March. “I think we have fared quite well during COVID-19 compared to other sectors,” says Mr Wallis.
“We’re lucky. People are caught at home and want some changes. 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.”
Chris Rennie, co-founder of Houselab say, “Many of our major home builder clients had record months during June and July with August also tracking strongly."
"This growth is attributed to a combination of the government incentives and the resilience of the housing sector, but it’s made all the more remarkable as it’s set against a backdrop of severe restrictions across Melbourne."
"We’ve also seen major homebuilders rapidly adopting digital innovation in order to provide customers with a compelling virtual experience during the sales process, helping to guard against any future market softness."
"They are also implementing software solutions to support their activities pre and post construction to help manage costs."
"Standouts across the major builders are the likes of Porter Davis who continue to drive innovation and in the mid range businesses like Beachwood Homes are also adopting digital technologies to improve their customers experience."