Construction Prices Increased?

Discussion in 'Development' started by Mak2137, 28th Mar, 2022.

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  1. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Sounds like you have only signed a Preparation of Plans Agreement (PPA) with a small deposit. That deposit is generally non refundable as it's used to design and estimate the cost etc so actual work has been done to the value of it so you are quite lucky it's even an option to get it refunded. I don't know why a sales person would call this a final price lock as it's anything but that.

    Construction prices (materials and labour) have gone up significantly and if you should continue forwards you should be aware that there are clauses and circumstances in the HIA Fixed Price Contract, in most states, that allow for further increases if the time between the contract signing and going to site goes beyond a stipulated time frame.

    However it likely that all other builders have been going through similar price increases so don't assume that you will find another cheaper builder if you do decide to not proceed with this builder.
     
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  2. Sackie

    Sackie Well-Known Member

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    Unfortunately this is a case of, 'ya snooze ya lose'.

    Many people ain't even snoozing and getting hit with escalating costs.
     
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  3. Mak2137

    Mak2137 Member

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    Thanks,

    The salesperson said many things like this. The initial deposit was non-refundable however they are ready to give us it back if we decide not to go with them.
     
  4. sash

    sash Well-Known Member

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    This is probably Perth correct?

    Lots of people don't understand the Perth construction process and get caught.

    A lot of the sales guys are not being honest. 44k is serious whack...look at shonky builders. Some the biggest culprits are in there. Who is the builder?


    Did you do enough due diligence? Not a market for the inexperienced. If you know what you are doing huge profits there.

    290k seems a lot. How big is the house? And another 44k on top? Wow. Were you a pain to them because some will make clients go away by increasing costs and refunding deposits. Reputable builders are offering 6-9 month genuine price locks at around 800-900 per month. If prices go up the amount gets consumed if not they give it back.
     
    Last edited: 28th Mar, 2022
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  5. Tofubiscuit

    Tofubiscuit Well-Known Member

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    To the OP, don't be surprised that half way through the process you end up paying another $20K more.

    Also, do property DD on this builder. 15% increase may even be too low, if they get themselves in a financial debacle and become bankrupt. You will end up holding a big **** bag of an incomplete build.
     
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  6. sash

    sash Well-Known Member

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    And you believed him?
     
  7. sash

    sash Well-Known Member

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    100%.

    They better have very good control of their supply chain. I am using a builder in Melbourne who is smashing the timeframes. They started in Oct last year and expect to finish by July this year
     
  8. Mak2137

    Mak2137 Member

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    They are reputed
    Its Melbourne. Yes we did, and recommended by a friend.

    House is 27 sq. Yes that's what my concern is that 44k is way too much. It was expected max 10k as I have seen lots of people talking about it.
     
  9. Mak2137

    Mak2137 Member

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    Absolutely not, I was aware there are many hidden costs.
     
  10. sash

    sash Well-Known Member

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    Who is the builder?

    This highly unusual for Melbourne. Unless it is a WA based builder like the Homebuyers Grp or sister companies in Melbourne.
     
  11. sash

    sash Well-Known Member

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    27sq home will cost now $320k as a base price.

    The builder I used locked in pricing last year match and still honoured it.

    Other build in Wonthaggi builder put it up 9k due to land delays. Was ok with that.
     
  12. BNE

    BNE Well-Known Member

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    How does one typically do good DD on a local residential builder?

    I actually work in procurement for a tier 1 construction firm and we get the finance team to run the financial health checks whilst I will check insurances, see how many employees a business has, how many projects they have on the go and the stage of the projects etc.

    Is a future home owner expected to do all this? Genuinely curious.
     
  13. Danny370z

    Danny370z Well-Known Member

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    Electrical cable has gone up 35% since Christmas. PVC is rising every two months.These are the times we are in. You will look back on this in a year and think 334K was cheeeap :)
     
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  14. BNE

    BNE Well-Known Member

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    I’m sure it’s a dilemma a lot of people struggle with! Just build now or wait until prices settle down? What if prices don’t settle down and you waited for nothing? What If you wait and costs go up even more?!

    Just adds another stress to the build lol
     
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  15. Lacrim

    Lacrim Well-Known Member

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    Well if construction costs are rising sharply, wouldn't that push the asking price of new product up? Will it make existing stock/older props that don't need much work look 'cheap' by comparison?
     
    Last edited: 31st Mar, 2022
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  16. casuarina

    casuarina Member

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    This. How likely is it for the building cost to actually drop in 18 to 24 months' time?
     
  17. Gen-Y

    Gen-Y Well-Known Member

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    My industry source said early in 2022. Don't expect any relief for 18 months.
    As soon as I hear more on the changes, I will disclose it here.
     
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  18. noneother

    noneother Well-Known Member

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    Building cost may drop (e.g. I expect timber to drop by 10% within the next six months based on futures prices) but counterfactors like rising fuel and cost of living means those price drops are unlikely to be passed on. Instead they'll be absorbed as labour fees to offsets cost of living increases.
     
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  19. sash

    sash Well-Known Member

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    Nope exactly the opposite...people are very afraid that something will break.

    I reckon the prices of houses in poor condition will actually go down compared to houses in good condition.

    The market for read built new houses in places like Perth and Brisbane...even Adelaide is through the roof!!
     
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  20. Investor1111

    Investor1111 Well-Known Member

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    Look into your crystal ball. When will the cost of building be more reasonable in the future? @sash
     

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