Brokers might not think that the global price of timber has much to do with their work, but according to one data company, it is making life much more difficult in the crucial tree changer market segment.
Tree changers – those who move from the cities to regional Australia – are being stifled by the huge rise in the cost of building materials, most notably timber, which has gone up 380% in the last year.
The price of wood has skyrocketed as a result of lack of inward migration, bushfires and a huge increase in demand caused by new homes being built under the ongoing government stimulus packages.
You’ve got two parts,” explained Dan Petrie, Chief Informational Officer at Grafa, who published the study.
“Increasingly, there’s a heavy demand for skilled labour and builders to construct new housing stock. And you’ve also got supply issues, due in part to heavy bushfires that we had in this country in the last two years, and also the big population surge, in regional Australia especially.”
“By and large, what we’re seeing is that a lot more plantation supply needs to come online and also, what was previously accessed in terms of forest wood has been impacted heavily by bushfires. That’s a double whammy: the skills shortage and the material shortage that is playing out.”
This ties into the tree changer effect, which has seen tens of thousands depart the cities for regional Australia and sent property prices spiralling. This was happening before the pandemic, but has been greatly accelerated by the widespread shift towards remote working.
“When you get fiscal stimulus and monetary policy settings that create record low interest rates, huge incentives from the state, plus increasing flexibility in workplace options around working from home, there is a desire to get out of the cities,” said Petrie.
“We’re seeing this play out in America where people are refusing to go back to work in an office 5 days a week, 9 or 10 hours a day.”
“You’ve got now a lot of people who are choosing lifestyle, four day working weeks and combined with record low interest rates and no sign of major inflation shocks yet. They’re taking advantage of cheap money and wanting to build their dream home, their castle. It’s the perfect storm.”
“Australia had a huge population surge until two years ago: until the pandemic, 170,000 people were coming here a year. Not just students but also new migrants.”
“You take relatively strong population flows out of the city and into tree changing coastal regions, coupled with a shortage of skilled professionals in construction and now a squeeze on materials.”
“We’re not getting the same imports of wood products, which previously nobody would care two hoots about, but which is having an impact. Combine that all together and you’ve got pressure on costs that is always going to feed in, and will have an impact on those borrowing a lot on low interest rates.”