Only a year ago, it would have been unthinkable that a tremendous increase in construction demand would push the industry to the edge of disaster, with a catastrophic scarcity of construction materials creating debilitating delays and cost overruns.

As Australia and other countries across the world grappled with the consequences of the pandemic, they pressed the start button on economic stimulus initiatives aimed at house development.

HomeBuilder achieved the desired result, but also caused a "diabolical" and "debilitating" spike in demand for timber that has far outstripped supply, as industry experts have called it.

Speculation is rife in the embattled sector that an increasing number of developers and builders are cancelling hundreds of contracts and refunding deposits as a result of ballooning residential construction costs caused by supply restrictions.

And it appears that things will worsen before they improve.

“If it smells like timber and looks like timber, we’re buying it,” said Redland Bay Roof Trusses co-owner Drew Parker, whose family business has been supplying south-east Queensland builders for more than 30 years.

“Every day we’re having problems sourcing timber,” Parker said.

“We’re basically constantly running at a deficit in terms of forward planning of materials, looking at higher cost substitutes and buying anything and everything from anyone.

“I’ve never seen anything like it—never seen 15, 25 and 30 per cent price increases, let alone every quarter.

“Never seen the lead times of orders that we’ve got right now. It’s gone from two weeks to—well, if you want something this year you’ve got no chance.

“At the start of the year, we saw hints of what was coming and by March it was insane. In the space of six weeks everyone was booked up for the rest of the year. The needle on the gauge effectively went from empty to full.”

The housing market in Australia was at a low ebb at the start of last year, with new dwelling approvals and commencements at a seven-year low.

Then, as Covid-19 swept over our shores, it was feared that a catastrophic economic downturn would hit the already-weak construction industry hard.

“Everybody thought the industry was going to go the complete opposite way it did,” Housing Industry Association economist Angela Lillicrap. “It was a bit unexpected.”

The surge in detached housing approvals fueled by the HomeBuilder stimulus, according to Lillicrap, was unprecedented, surpassing the previous boom's peak in 2018 by more than 20%.

“Compared to what we expected at the start of Covid, it’s a good situation to be in,” she said. “And as much as no one wants these issues (building material shortages, construction delays and soaring costs) they are much better to have than no work.”

The timber supply difficulties, according to Lillicrap, will be remedied when the number of home approvals and starts continues to decline, and international timber demand and prices moderate, which is already happening.

“We are at the peak or just past the peak and the problems should start to naturally ease over the next six to 12 months,” she said.

Everyone has finally “got the picture,” according to Drew Parker, that the hole the industry can force supply through is only so wide and backed up—and that, while being a “scheduling and cashflow nightmare, not to mention the price rises,” it will soon stop.

Bluebird Property project manager Claire O'Rourke said the company was presently working on ten active building sites and seeing the effects of the timber shortage firsthand.

“We first saw the issue mid last year when the bushfires hit tens of thousands of hectares of our domestic reserves,” she said. “Now with the HomeBuilder boom the situation has become even worse.

“In the last six months we’ve seen a 20 to 30 per cent increase in the price of timber and lead times are stretching up to 16 weeks.”

It was a matter of integrating the concerns into its programming and pricing plans, as well as working with the builders to ensure they were able to make their orders as quickly as feasible, according to O'Rourke.

“The spike in demand won’t continue forever and we’re already seeing a large dip in building approvals so all the indications are that things will normalise next year,” she said.

Meanwhile, due to a lack of timber, partially built residential construction sites are becoming more common in Australian home developments.

“We’ve started to see it on our own estates,” Gold Coast-based KDL Property Group managing director Kent Leicester said.

“Sites that we settled in January, it's now seven or eight months later and builders haven’t been able to start homes. Slabs are on the ground but they can’t get the frames up yet.

“A lot of them have looked at other options and shifted to steel to make up timeframe shortfalls but, in the meantime, steel also has been hit by supply issues and hefty price hikes.

“It’s certainly the worst I’ve seen it. HomeBuilder and the low cost of borrowing have really pumped up the market and we’re not seeing it easing at the moment.

“More price increases are expected next quarter.”

Residential high-rise builders are complaining that the timber scarcity is causing them problems, aggravating their larger problems with steel supplies. Timber door delivery lead times have blown out from a few days to eight weeks, according to one Gold Coast-based mid-tier building company.

The country is seeing its biggest material shortfall in over 40 years, according to Scott Brumfield, construction manager for Melbourne-based business Hansen Yuncken.

“Delays in sourcing materials, from international suppliers especially, is not a new issue for Australia, given its geographical location, but one exacerbated by Covid-19 among other factors and we now have a crisis on our hands,” he said.

Many smaller builders have bitten off more than they can chew with fixed-price contracts during the HomeBuilder stimulus frenzy, and the following months will be do or die for them.

“The pressure is still building and we are bracing for more builders going to the wall and collapsing later this year,” Master Builders Queensland deputy chief executive Paul Bidwell said.

“Timber is by far and away the biggest issue. Timber frames, laminated beams and roof trusses—you just can’t get them, and prices are up 70 per cent since last November and still rising.

“No one expected this. The timeframes are quite extraordinary. Back in June builders were being told not to expect delivery of timber trusses until 2022.

“We’ve heard of one big project home builder who signed a contract at the beginning of the year for completion in November and they will not get trusses until July next year and completion won’t be until December next year.

“It’s absolutely diabolical and there’s no suggestion it is going to fix any time soon—at least not until well into next year.”

Not surprisingly, the price of lumber has hit historic highs this year, fueled by increased worldwide demand and supply bottlenecks, culminating at US$1600 per 1000 board feet, a staggering 300 percent increase over the previous year.

Australia used to import approximately 20% of its house frame timber, but that number has dropped to roughly 14% due to the pandemic's interruption of shipping and a surge in construction activity in the US and Europe that has sucked up a lot of global timber supplies.

Victor Violante, deputy chief executive of the Australian Forest Products Association, claimed Australia's timber mills were operating at full capacity 24 hours a day, seven days a week, and were "stretched to the limit."

“We expect the HomeBuilder spike will work its way through the system over the next six to 12 months but it’s a bit of a wake up call,” he said.

“The last 12 months has highlighted Australia’s vulnerability due to its diminished self-sufficiency in timber production.

“At the moment, we have dropped the ball, out timber plantation supply has been going backwards and we are not going to meet future demand.

“We will get out of this timber shortage but long-term we are not out of the woods yet.

"Whenever we see these spikes (in demand) we will be back into shortage territory and that will occur more frequently if we don’t plan for the future.”