Building costs can blow out

Did Robert Kyosaki tell you theres an impending economic recession similar to the GFC in 2008 on the way? (Maybe a disucussion for here in MTR's thread xd -》Will this be the big correction)

Definitely a bit of a rental crisis in Perth and Hobart especially, vacancy rates last time i checked was < 0.5%. A housing shortage is not going to help these people living here. Will benefit those who own property in these locations tho.

 

Just making the point that there are many inputs to a healthy economy, not least a balanced supply of materials, people etc. Serious issues with some inputs can create issues in other areas we dont foresee. I just bought in perth, but pointing out the risk.

 

Home Innovation Builders collapses is the latest construction company to collapse in Australia | Daily Mail Online

Building atm high risk in most States

 

The risk is very real. The buyers will be affected with uncertainty and anxiety build up.
Who is next ... then who... then who...

That is why I have put off any development till the dust settled.
The rumours I am hearing would put anyone starting especially when I am going to do a triplex or quadplex.

 

This is my experience:
- Cost inflation can be passed through, many builders will do this even mid construction. In a hyper inflationary type environment this can be in the hundreds of thousands.
- Slowness all round on builds, increasing interest costs and also build costs as costs ramp up with the slowness. This could be covid, contractor issues, supply issues, etc.
- Higher risk of financial issues for the builder. This can cause all sorts of problems if it passes through to the owners.

Our general approach has been to crack on, manage this risk with buffers in place and also to diversify builders where possible across multiple projects. There are some cost inefficiencies with this approach but it is the cost associated with risk management.

 

Great advice Redom.

I could do duplex at a time if I want to mitigate risk, that will increase cost.
I really don't feel like signing anything in 2022. Seems like too many headwinds in the construction side.
Opportunity cost is less than 10% for doing nothing. Lets see how 2022 plays out as it is just bad timing. Maybe the inflation genie will be fixed by end of 2022?

 

Update Government grants Perth

Got a pleasant surprise $60,000 in my bank account yesterday

Government has too many applications and just trying to process asap.

My project is strata built which means payment of grant was only due once my project was completed/strata. They are processing these early as long as you meet other guidelines

 

Good podcast i found on my travels on the current climate in the construction industry.

 

More stress, increases on builds in QLD

Major building company demands hopeful homeowners cough up extra money to complete their homes | Daily Mail Online

 

It looks like a big cluster of mess waiting.

Interesting times ahead.
I have spoken to some people in the industry that have 50 years experience.
They have never seen it so bad.

 

Ditto

 

Bewdiful......

 

My brother's duplex is delay for another 2-3 months.
So much for moving in after Easter.
First increase in fit-out stage - tiles $20 per m2 for the same tiles.
Waiting for more items to be pass on to him.
Surely he can't get away with no increase in cost. He can't be that lucky... I knew this was coming.. LOL

 

You would think

Still no increases at my end

 

I'm Building two at once not in QLD however but its the same nation wide, Luckily contracts were air tight everything went up after i locked the price in 2020. Combined the same product would be 150 - 200k more...

 

Yeah but value has risen how much ? He is ahead. Tiles are possibly a variation to the fixed contract.

Many costs are fixed in terms of completion. But be wary of anything they can pass on. eg Variations and mods. They can go gang busters on those to make up for what they cant push. Depends on how the contract is written. This issue also floods down to subbies. Many are under pressure to keep their prices down or at old rates or they get no more work. As old jobs run off then they benefit from higher rates elsewhere.

The biggest surprises are people with builds pending land being registered. This is generally a reason a builder can reprice due to delay. Not a few weeks delay in council but when land was acquired two years ago and is still not registered well no builder will hold a two year old price. Its when "fixed" isnt quite so fixed. Time is of the essence clauses are normal.

 

Lucky

 

Are there many builders doing fixed price contracting currently? Or is it more common for variation contracts to be the go-to choice for structuring contracts as we head into mid 2022 and continue into 2023?

As the price to build free standing residential houses go up, will we see an increase in the construction of mid / high apartments, particular in captial cities / larger regional towns (on the cards already maybe due to housing affordability to meet demand)

Affect on property prices generally speaking? Wdy guys think

 

It's only an illusion that, ' fixed price' ever existed.