What kind of net margins do builders operate on? Starting to see more issues with builders in WA and was always curious as to how much margin they have in their builds to account of any movements in costs that they can't pass onto clients.
I guess it depends from builder to builder. I think larger builders will be operating on minimum 25% gross margin. Smaller ones probably 10 to 15%.
Larger builders typically operate on smaller margins, at least they do over here on the East Coast, they can afford to as they're doing larger volumes. Eg Metricon operates on <5% margin for their house and land packages, smaller builders operate between 10% - 20%, based on my experience
Large National builders would like to earn 5% in the aggregate (net but pre-tax profit). That has been challenging for the last two years.
-5% used to be the go if we were keen on the job,then it was my job to bring the subbies in under budget.
Sorry maybe answered the qn wrong. Contracts for builds are generally at cost + 15-20%. For H&L from project builders, margin levels are a bit higher usually. Problem with fixed price contracts and highly inflationary environments is that the price rises are absorbing the margin, and then some in particular cases. Hence they haven't actually made much in a building boom - the tenders don't reflect the actual cost paid for works. From there they'd pay overheads/etc and get to their actual profit margins.
