16/05/2023
Building a home is Risky……. or is it?
With the news of many builders going into liquidation across the nation, now is the time to be cautious when engaging a builder.
Industry representatives suspect that 50% approx. of all builders have been trading insolvently for some time now, hence why so many have unfortunately closed their doors within the past year…. over 1200 this financial year.
There is no doubt within this current market that “small to intermediate” builders are a safer option if you are considering a construction project. Ok, so they don’t tend to have display homes or the large flashy offices, but that also means they don’t bare the same overheads, so they are leaner, nimbler financially, and able to navigate through these choppy waters far easier.
Will prices for construction and housing decrease within the next year / two years?
The industry groups and ourselves do not see prices dropping anytime soon, and last week the federal government admitted immigration this coming year is going to explode…. Their first guess was 160,000 per year, then it went to 195,000 application approvals, next it took another step up to 235,000, And now it’s … 500,000 per year for five years, and Victoria will likely receive 100,000 – 150,000 new Australians per year.
A bit of quick maths on my fingers and with an average household size of 2.5 people, and it’s a potential increase of 50,000 more houses than we needed before per year…. Victoria only builds approx. 50,000 per year currently….and since we’re not building enough now, and builders are either going bankrupt or are too scared to even start any projects, we’re about to see an even more drastic housing shortage than ever before….and most especially rental properties.
Bad news for people who want a house to rent, good news for our clients and investors who are ready to invest…. you see, it’s times like these where investors win, and that’s why the Team at APN are predicting a boom phase near the end of the year flowing into the following years. The conditions are perfect, there will be far too much rental demand and nowhere near enough supply. Interest rates are currently peaking, and it’s the perfect time to buy and build now.
The best time to get active in the market is right at the beginning of an upswing, there’s no point getting in on the action at the last minute because you’ll have missed the best part, and likely have paid too much, and the start of the new boom period is approaching rapidly.
Established housing sales will increase in price simply due to demand, with less builders to build, builders will be able to increase their margins, there will also be less trades to build. The demise and consolidation of a few of the larger builders has simply arisen from the increased costs (34% during the last 24 month’s……and still rising) of suppliers and trade labour, post record sales (last quarter of 2021) of “fixed price house and land packages”, many builders have been battling for the past 18 months.
The larger “volume” type builders simply rely on the cashflow of stage claims throughout the construction process and run on very little nett margin’s leading up to completion – hence why we have witnessed so many entering administration. The average nett margin or profit prior to tax is between 2 – 7% for most builders, so they don’t have much room to move, and adding to that, these supply and labour price conditions are driven by competition and sadly…. consumer demand. Add the pandemic, shipping issues and Govt incentives, and suddenly you have Australia’s largest industry in turmoil.
Why choose Affordable Property Network?
Affordable Property Network (APN) is a Victorian based full service residential housing buyers advocate focused on supporting all Australians with housing options that are selected on the basis they are affordable, liveable, cost effective, built by builders with sound financial and performance history, are approved to construct Govt funded NDIS and Social Housing, and have excellent reputation within the industry.
APN was founded by an experienced team who have managed and ran some of the largest building companies in Victoria. We completely understand the volume build methodology along with their current processes.
We currently deliver and manage many builds across the state of Victoria (and Tasmania) with varying house types and levels of inclusions. Our personal expertise ensures you will receive a fair and honest price for your new home and in turn receive the exceptional quality you deserve, either for your forever home or investment property.
Some of the different products we can offer are:
- Residential House and Land packages (with or without the Turnkey inclusions) for both owner occupiers, and or investors
- Co Living properties for our investor clients (we like these because they deliver “higher” than average returns)
- Social Housing (we have provided hundreds of homes for local and federal government both within Victoria and Tasmania)
- NDIS properties – We are tenant driven; we do not simply sell to build (there is so much risk with NDIS tenancy/vacancy hence being tenancy focussed)
- Unit developments – both small and large
- Custom Homes (either high end or mid-range)
And we can offer land options for your next investment, as we have an extensive land developer network.
What don’t we do?
We see to many organisations giving advice on the following via investment webinars, seminars and events and collectively believe that most are unqualified to do so, as does the ACCC:
- Offer financial advice, tax minimisation methods, or tell you how you could increase your wealth (we can refer you to a professional)
- Offer lending or banking brokerage (we can refer you to a professional)
- Charge excessively high “hidden” commissions that you are not aware of
- Offer Funds management suggestions (we are not fund’s managers, but again we can refer you to a professional}
Our focus is about low risk construction, “affordable” priced homes, and our builders have impeccable experience and construction history, and not one of our members has suffered from liquidity or insolvency challenges, nor are we actively rectifying “other” builders failed projects which is plaguing the industry currently, although we do care about our construction brethren within the industry, and are deeply concerned for consumers that have been affected.
We currently have “order availability” within our network for new projects, so if you are considering a new project, we welcome an initial “no obligation” discussion…. now is a great time to gear up for an arising investment market.
Contact us today
