Veteran builder Steve Simeoni urged caution for Tasmanian buyers

Tas City Builders owner Steve Simeoni said the industry is coming off a period of intense activity in the residential segment, and conditions for builders there are "tough" and set to get tougher as building work dries up.

He said his business has already been stung by several contractors going bust and things could get worse as conditions in the industry become dire.

Demand for building work surged during the pandemic, driven in part by government support measures such as the HomeBuilder initiative, which gave $25,000 grants to families building their own homes.

The surge in construction demand helped stoke significant price rises for building materials over the past few years.

Materials such as copper wiring, steel, concrete, and plaster "went through the roof", Mr Simeoni said.

It was that surge in costs that spelled disaster for Multi-Res. It had signed contracts to build dozens of homes at fixed prices, and it couldn't profitably finish them, according to a report from its liquidator.

The surge in building demand also drew many younger tradesmen into the industry.

But that extra construction demand is now starting to subside, he said, as the cost of building has put off many potential customers.

New building approvals in Tasmania fell by about 30 per cent in 2021-22, compared to the prior financial year, according to figures from the Department of State Growth.

Based on the trend so far this year, approvals are set for another annual fall.

That means there is less work about now for the builders that surged into the industry during the pandemic.

"The landscape has changed in the last six months," Mr Simeoni said.

"We've already noticed a slowdown of job opportunities and more tenderers on jobs

"When it starts slowing down, and it is slowing down with the cost of building as it is, I'm not sure how these people are going to pay their wages."

With work drying up and some caught out having to complete fixed price contracts with materials that have, in some cases, doubled in price, Mr Simeoni said more failures are likely.

"It was just pushed upon them - the amount of work was extraordinary, there were all these [federal homebuilder] grants, and all of a sudden the cost of building has risen and work slowed down," he said.

"Now that the cost of building a house and land has increased, I'm not sure what these builders are going to do, and we haven't even started seeing that yet," Mr Simeoni said.

Some builders like his own Tas City Builders were in a more secure place, because it operates in niche areas and is less exposed to residential property.

But many of the new entrants have only focussed on residential property.

He said Tas City Builders has already been caught out by contractors going bankrupt.

Mr Simeoni said he lost a $30,000 deposit when a windows contractor went into administration, and has also lost money on electrical and fencing contractors going bust as well.

"We are wary now of who we trade with," he said, adding that Tasmanian families to be wary as well when selecting a builder.

The government is helping out.

It has announced some support for the families hit by the Multi-Res collapse.

Meanwhile, a government bill that would bring in a warranty insurance scheme that could compensate customers in the event their builder went bust is due to be tabled in parliament this year.

But Mr Simeoni said it was more important for the government to provide a continuity of work for the industry.

"This massive house boom has manufactured all these builders, but what's happening now?" he said.

"I know a lot of people that have stopped dreaming about their houses."

With the surge in the price of building a new house across the state, he said many Tasmanians are opting for cheaper alternatives.

He said Tas City Builders manufactures small modular homes as part of an effort to help alleviate housing shortages.

He said he can sell a two-bedroom modular home for as little as $140,000 - probably half the cost of building a regular home.

"Instead of normal houses like your regular Australian home, they are now going for portables because that's the only thing they can afford," Mr Simeoni said.

One problem is red rape.

The regulations around building and planning are stringent and every agency takes its time to sign off, he said.

"So to start a project, even to draw something up, takes six months to go through a process, TasWater takes its time, planning takes its time, the amount of certificates you need now just to get a simple set of plans is so costly and so time-consuming," Mr Simeoni said.

Even placing the company's portable modular homes on land is time-consuming, he said.

"We've noticed that in our portable homes business, there's a lot of interest and a lot of willing people, but the process is extremely long and onerous to put them on their land," Mr Simeoni said.

He has called on the government to consider different planning processes for modular homes in order to cut down on the administrative delays and the costs, and get roofs over the heads of needy Tasmanians sooner.

"These modular homes are about putting roofs over peoples' heads, but currently it's as onerous as putting in a standard house - if not more onerous than a standard house," he said.

Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content: