I often get asked if now is a good time to build

Hi Everyone

After 3 incredibly difficult years, the answer is yes, now is a great time to build.

The bottom line is that building has finally become easy again. The last couple of years were so difficult.

The building industry has been going through a massive well publicised clean out, and the results of this have really been evident on the ground over the last few months.

Here in Sydney, tradies and materials are finally available again, and most importantly, pricing has pretty much stabilised.

The difference between August 2023 and August 2022 is incredible.

For those who followed my duplex blog, last year Sydney had run out of scaffolding, and I had to call over 20 companies to try and track some down, and prices had doubled. Now I have scaffolding companies calling me chasing work.One big firm was telling me last week that they are selling most of their stock as they don't have enough demand.

Another example was bricklayers. We were putting adds up online and literally driving around building sites trying to find new crews, recently I have been getting at least 2-3 calls per week from good sized crews looking for work.

I use this amazing excavation crew who were telling me last week that the previous week was the first time they had no work in 6 years and are now thinking of leaving the industry.

My last example is a well known window company who flat out refused to sell me windows, now contacted me last week begging for work. I should name and shame them actually because their previous behaviour was appalling, Wideline, no I won't be letting you quote my jobs. There I said it!

The sad part is that a lot of these tradies you talk to are owed significant sums of money by other builders. Particularly for jobs in Western Sydney.

My joiner has $500k outstanding, plumber $60k, a third of that since January. Nearly every trade I speak to is owed money. The story is the same. Builder saying that the clients haven't paid, so the tradie misses out. This tells me that the clean out hasn't finished yet.

For our business, we have made a point of paying our tradies the day invoices have come in, essentially to buy their loyalty. When our clients have been slow with payments this has meant that we just can't pay ourselves, but now that we have a good pipeline, that loyalty is paying off and our jobs are getting priority.

Building has never been smoother.

Price wise, I have several jobs out to full tender at the moment, and we are still getting some stupid numbers in, but mixed with that are some very reasonable ones as well, so it's just a matter of shopping and negotiation.

A great example last week was 3 Hebel quotes, 2 came in at $90k and one at $145k. I simply went back to the high guy and without hesitation his priced dropped significantly. We had a similar situation with a bricklayer early in the week who started at asking $2.50 and dropped to $1.35 when we told him the job was going to someone else. So there are tradies who are still trying it on.

But overall, this is the way the market should be ( minus people not being paid). Essentially, we are finding it easy to find quality trades to do high quality work in a very reasonable time frame.

So in summary:

1. If you have been sitting on the sideline waiting for the market to stabilise before building your dream home. I genuinely believe that time has come.

2. Prices have definitely stabilised and supply issues are mostly gone. I wouldn't be talked into a cost plus contract for instance.

3. Unfortunately, there still will some builders going under, but I believe these are the ones who have priced their jobs too low, thinking they need to pick up market share. So hunt around, find a builder who prices your job fairly ( not too low and not too high). My theory is that if they are pricing your job too low then they have done that to other clients to win work and there is a good chance they won't finish your job. From time to time I get people calling me saying that they have quotes to build a duplex for $750,000 and I know that materials alone will cost over $900,000 and there is no contingency built in.

So even though it is tempting, choosing the cheapest builder could cost you.

And lastly, don't forget to do your research. Go look at other builds, talk to clients and see what their experience has been, and stick to timber frames.

Cheers

Simeon

Interesting read. Good points.
I remember posting in the past that you'll be getting calls for work from trades looking for jobs, now you are

Personally, I think it'll get worse. The data is terrible. New work, especially private dwelling data is bad. With rates up, lending down and recession coming or near enough to one, more pain for the industry is incoming.

You make a good point about some trying to BS the prices, maybe clawing back some losses or trying to. A $1m home won't become $500k suddenly, but 100% shop around as you said.

How are you now costing? If you're happy to share. Knowing as you say, Bricklayers will take jobs for $1.35 and not $3 per brick like some were asking 12 months ago. How dose this translate into contract prices.

Cheers

I think you are correct, there is a lot more pain to come, especially in the more vulnerable suburbs. But as the bigger builders slow down and tradies become quieter, for those who can afford to build, this is a good time to capitalise.

We are based in a more affluent part of Sydney, so for the most part and with the pipeline that we have locked in for the next 18 months, our clients should see the benefit.

In terms of overall pricing, it is too early to say. I priced a couple of homes in the last month and they came in about $70/sqm under where I thought they would have been ( about 2%).

I have 3 jobs out for full trade pricing at the moment so once those numbers all come back in I should be able to answer accurately as I can compare to what we estimated last year.

But the main point is, I think we will be seeing a minor drop rather than a booming increase.

I have noticed that gyprock prices are still very very high and possibly increasing. Every new job we have quoted seems to me more expensive then the last one. And appliance costs have also gone up.

Maybe. There are other macro factors that haven't stablised yet.

This might be a bit of calm before the storm situation (or not). Sadly the crystal ball has been wrong more often than it has been right in these matters.

Due diligence is definitely required, but also a good review of ones risk appetite and a solid exit plan if you cat weather the storm.

Meanwhile

https://www.afr.com/property/residentia ... 720-p5dpuz

This might bring in some new money to the market, although interest are still high and a lot of less people are building or buying now because can't get financing from the banks.

Thanks a lot for the writeup Simeon. Makes sense.

May I ask why you said stick to timber frames? I may lock in a builder who does steel frames only. Will it be a bad decision?

You may have a builder who has better luck with steel than we have.

We have been experiencing the worst delays with the two suppliers we have tried, and there is an abundance of quality carpenters around at the moment. So we are only doing timber cut on site now.

Timber is so much faster more flexible and the prices are comparable.

cheers

Simeon

About bloody time! Would be keen to hear what your tender results are and what's happening with prices. I'm getting pricing done soon (Adelaide) so fingers crossed prices haven't gone up too much over the last 4 months.

I will try and sit down in the next few days and analyse them and then post a report

Well thats a relief! The whole family is sick of waiting.