+6113002454901300 245 490
SuburbaniteProperty Advisory+611300245490

The building sector is under pressure, how can you protect your money in 2022 if you are going to build?

Whilst more often than not ‘business as usual’ during the pandemic, the building sector has certainly found itself in murky waters.

In the June quarter of 2021, the number of houses (not apartments) under construction jumped to 88,445 from the previous June quarter of 56,060 in Australia thanks to the HomeBuilder Scheme.

But Anna Porter, Suburbanite Principal, Valuer and Property Commentator warns that the Hotondo Homes Tasmania Administration Announcement is only the start of the pressure being placed on builders at the moment and we could see more enter voluntary administration.

“They are a very reputable company and when a builder like Hotondo goes into administration, there are so many people who lose,” shares Porter.

“Think future home owners, the contractors, the auxiliary service providers, the list goes on.”

Pricing pressures, time delays, shortage of stock, labour shortages and fixed price contracts just don’t have allowances for the extreme pricing hikes the industry is seeing in raw materials.

“If you’re in a fixed price contract prior to the increases in materials then it is the builder who has to absorb it which is why some sadly are going broke,” says Anna.

“The consumers that will get caught out are those in cost plus contracts, those sitting on quotes for 3-6 months and owner builders,”

“Most fixed price contracts will have allowances for some items such as x$ per sqm for tiles and anything spent over that allowance is worn by the consumer.”

Porter warns if you are thinking of doing a building project make sure you factor all of this in and be prepared for price increases of up to 35%.

She also advises home builders to opt for progress payments in all building projects and make sure the payments are aligned to the stage of construction.

Anna shares exactly how to protect yourself as a consumer about to do a big build.

“Progress payments are a pay as you go approach instead of giving the builder all the money up front. Each stage of the build represents a percentage of the total construction costs,” Porter explains.

“Qualified valuers can do these schedules and payments for you so you don’t pay too much too early,”

“The builder puts in a claim for the stage and the valuer determines if this has been reached and determines if the percentage is appropriate,”

“All too often, I would go to a site for a frame stage claim and find only the slab was poured – there’s no doubt, engaging the right professionals is key to safe guarding yourself.”

As a seasoned property professional and speaking from experience with her own projects, Porter warns if you pay the builder too much too early they can take your money and not complete the project.

“This has been a common trend, especially during the pandemic and many home builders have been left short of funds to complete with another builder,” says Porter.

“There has also been an increase in the number of half-finished homes also on the market.”

Anna cautions to always check the building contract, even with progress payments as they are often incorrect and/or weighted toward the builder.

“Each stage and payment should be checked,” says Anna Porter.

“The bank will do progress payments with their valuers if the client has finance but keep in mind there can be a discrepancy between what the client has agreed to pay and what the bank will pay at each stage,”

“A good rule of thumb is only paying for items which as installed and always work to what the bank has agreed to pay to save a lot of pain and stress.”