Building costs can blow out

Discussion in 'Development' started by MTR, 14th Apr, 2021.

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  1. David_SYD

    David_SYD Well-Known Member

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    Steel prices have risen c.30% since November 2020 and are rising every 2-4 weeks. This effects most trades, actually, any trades requiring metal materials; plumbers, fire services, steel reinforcement and obviously, structural steel.
     
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  2. Squirrell

    Squirrell Well-Known Member

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    Walking round our streets in melbourne i have noticed 80 pct of labourers are chinese/filipino etc. I wonder whether there really is a rise in labour costs, or rather fatter margins for builders? I see a similar thing in tech the field i work in. Lower wages for tech workers equals fatter margins for services companies.
     
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  3. MTR

    MTR Well-Known Member

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    Not good for these guys

    In Perth I think tradies can name their price. The grants have helped with this Building boom and as mentioned prices of timber, steel etc soaring
     
  4. Luca

    Luca Well-Known Member

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    Mate in construction here in Australia labours are super paid, the ones not paid well are illegal. US they travel at $7/$10hr. Developers are the ones making money, builders don`t have huge profits, there are definitely more profitable businesses out there.
     
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  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I see quite a few builders will struggle financially due to this which may seem odd. However most builders only have a few circumstances to increase the cost of a fixed price contract once it's written and then it's for around 5%. So they are having to absorb the monthly increases in supply and labour. This is mainly an issue for the smaller to medium builder, not to much the very large ones.

    Most builder (in Perth at least) have been running for the last few years on lean margins to maintain work during the down turn. When you add in having to absorb price increases now it could spell trouble. Their options are to go for cheaper workforce (not so possible these days when 457s visa holders are hard to fly in) or wait their turn for the trades they know will do it for the price they need.
     
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  6. MTR

    MTR Well-Known Member

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    In saying this, my builder mentioned one of the big builders in Perth is going under? Lets see, I hope not
     
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  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    There is rumoured to be more than one. The big ones are not immune, Pindan for example, but they often have more things they can cut back on and restructure to try and get through issues due to their size.
     
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  8. MTR

    MTR Well-Known Member

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    Its the small contractors that get really burnt:(
     
  9. Rooky

    Rooky Well-Known Member

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    In my observation, its actually boom times like these which are dangerous for builders. You are right, WM. They have fixed price contract to be delivered and they cant get material at cheaper price due to price rise and wage hike. So they go bust. Having said that, in my view, most go bust due to poor financial controls. Its like any business. If builder ties his purchase to signed contract, its very easy to survive and thrive. But many of them are too focused on other areas of business rather than financial controls. This is true for all category of builders - small or large.
     
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  10. MTR

    MTR Well-Known Member

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    Anything to do with greed??
     
  11. Propin

    Propin Well-Known Member

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    I think naming your price is the case for residential but not so much for commercial in Perth.
     
  12. Rooky

    Rooky Well-Known Member

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    Greed is a factor too but its more to do with poor financial discipline than greed.
     
  13. Rooky

    Rooky Well-Known Member

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    True.
    But pipeline of new work is drying up for residential builders too. Later half of 2022, they will have less work. As an investor, its good for us as it means less supply and more balanced market.
     
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  14. Propin

    Propin Well-Known Member

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    I hope so! I was talking to a builder last week and they have two years of work. I want to build for better cashflow.
     
  15. MTR

    MTR Well-Known Member

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    As long as end values dont drop. This will happen if there is too much supply, I dont expect this yet
     
  16. MTR

    MTR Well-Known Member

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    My bricklayers started on Saturday
    Praise the Lord:)

    My builder said BGC is giving clients credits as they can’t get bricklayers till December.

    Timeframes and costs could blow out:(
     
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  17. GoldCoastBound

    GoldCoastBound Well-Known Member

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    What state is this MTR?...i was a bricky for 30 years till 5 years ago
     
  18. Propin

    Propin Well-Known Member

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    Perth, WA
     
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  19. Propin

    Propin Well-Known Member

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    Forget the Gold Coast, come to Perth, we have much better beaches , hehe
     
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  20. Perky29

    Perky29 Well-Known Member

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    Our brickies are due to start later this week - so hoping they do start on time!
     
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