Are you remodelling in 2019? Alternatively, have you decided to build that custom home you’ve been dreaming of?
There has never been a better time to build a new home! This is a result of many reasons, a few of which I will look at in this post.
Check out why you can benefit in 2019
Edward Brewer Homes has been experiencing vastly improved construction times of late. For example, a two-storey home that would have taken ten to twelve months in favourable building conditions, is now possible to complete in six to seven months.
This is a part of a three-way benefit that the current home buyer can take advantage of. The reason for the improved completion time is mainly due to the fact that trades are more readily available. In addition, the trades that we now have access to, are of a higher standard than was true in previous years. In addition, they are more readily able to start construction immediately, which has not been the case in years gone by.
In addition to faster construction times, and the better availability of trades, prices are also now a lot more stable than in previous years. While it is true that the industry has been in a sustained downturn over the last few years, this situation is not going to hold forever. Builders currently have little to no profit margins, making this the worst downturn in 30 or 35 years or the worst we will see in our lifetime.
The Building Price Fallacy
Understanding this means recognising that building prices are going to go up, not down. There is currently a fallacy that building prices will go even lower in the near future. This might be true for the existing home market, but it is not true for the new build home market. This is because the cost of building is slowly and steadily rising, after a large fall in 2016. The positive growth from 2016 to date suggests that this will be a trend, and that the industry will now see mild increases at a sustained trajectory in the years to come. As prices for materials increase, so too the cost of building will increase. This upward trend is currently quite slow, but it is there, and will gather steam through 2019 and beyond.
Effect of Government Action
This trend has been helped by the anticipated upward pressure on building costs as a result of recent government announcements. The WA Premier, Mr Mark McGowan, last week announced that the state would be experiencing a deficit surplus for the first time in six years, and that a result of this will be that the state government will be expanding its Keystart loan book by more than $420 million (the Keystart program is designed to provide loans to disadvantaged or low-income first time home buyers, to help them meet the deposit requirements for loans from major lenders). This is anticipated to stimulate demand in the housing market, but will also serve to increase the cost of building new homes.
The recent Banking Royal Commission has also added to the situation. As more revelations of major lenders playing fast and loose with loans come to light, we expect a much tighter loans approval process, and a drop in the number of ordinary Australians who can get access to loans for building. This has already lowered demand for new build housing, and is expected to continue into the years ahead. And, as any high school business student can tell you, lower demand equals lower price.
All of these factors combine to bring us to this point - there has not been a better time than now for building, especially because of the speed of construction, better quality, more available trades, and stability of pricing. All three factors combine to make this a great market for home builders, whether first time or not. As soon as the market rights itself, builders will have to start working to higher profit margins, whereas most builders are currently not making any profit. Consumers are currently getting the best deals possible on new homes.