Profit margin of builders

Mar 24, 2009
6:48 pm

I think the 10% profit may be true if it means that after paying all the overheads, the boss gets 10% for every house built. When we first approach Eden Brae, a few years ago, our base price was around $230k. With upgrades and site cost, it was around $400k. We asked for 10% discount ($40k). The sales person or whatever she is called, told us that is not possible as they make very little profits. Yeah right! This is with almost $170k of upgrades!

thlo

Mar 26, 2009
5:59 pm

ed @ EcoClassic

thlo

As material costs are easing, are builders reducing their prices? If not, what would it take for that to happen?

I don't know what the basis is for your comment... I can say that materials I am buying are increasing and anything with a global price like steel, aluminium or any form of energy, is suffering from the exchange rate fluctuations. For prices to reflect cost reductions there needs to be 1) A cost reduction, & 2) Stability at the new level of cost.

Ed

Ed, I meant raw material cost, not very knowledgeable in this area but I read that they have eased a lot since last year.

If I read your answer correctly, even though steel may be manufactured here using local raw material (prices of which may have eased), the price doesn't necessarily come down because the Aussie dollar has lost value. Is that what you mean?

ECOECO

Mar 27, 2009
11:02 am

thlo

ed @ EcoClassic

thlo

As material costs are easing, are builders reducing their prices? If not, what would it take for that to happen?

I don't know what the basis is for your comment... I can say that materials I am buying are increasing and anything with a global price like steel, aluminium or any form of energy, is suffering from the exchange rate fluctuations. For prices to reflect cost reductions there needs to be 1) A cost reduction, & 2) Stability at the new level of cost.

Ed

Ed, I meant raw material cost, not very knowledgeable in this area but I read that they have eased a lot since last year.

If I read your answer correctly, even though steel may be manufactured here using local raw material (prices of which may have eased), the price doesn't necessarily come down because the Aussie dollar has lost value. Is that what you mean?

Yes, that's right. Minerals are traded globally in US dollars. But after processing they also contain a lot of embedded labour costs.

Ed

andrew78m

Mar 27, 2009
12:12 pm

I have it on good authority that upgrades, would be in the vicinty of a 25% margin. Builders don't like to cut their prices and offer discounts.. They are more willing to sweeten the deal by adding extra's.. This is how I will be proceeding.. Leaving the upgrades to the minimum, doing flooring seperately (using the builders preferred supplier so that it can be done during constuction)

My flooring quote was 24k for around 92m2 of timber floor. I am now asking for a quote directly with their supplier and will let you know what it comes back at, but I am expecting to save around 6k.

ECOECO

Mar 27, 2009
12:30 pm

andrew78m

I have it on good authority that upgrades, would be in the vicinty of a 25% margin. Builders don't like to cut their prices and offer discounts.. They are more willing to sweeten the deal by adding extra's.. This is how I will be proceeding.. Leaving the upgrades to the minimum, doing flooring seperately (using the builders preferred supplier so that it can be done during constuction)

My flooring quote was 24k for around 92m2 of timber floor. I am now asking for a quote directly with their supplier and will let you know what it comes back at, but I am expecting to save around 6k.

Your authority is correct - but more like 40% margin. Any price you get from a supplier you can add around 25% to get the builder's price.

Ed

blahblah

Mar 27, 2009
12:47 pm

Don't forget that the larger builders will have deals built in on the products they use

I know one large sydney builder for every house done with a brand of electrical switches they receive free IXL's lights and a rebate on the gear bought payed back from the manufacturer. And quite often they buy some gear alot cheaper than the wholesalers for the simple fact they want their brand installed first up, sowing up future upgrades etc..

Thats just on the electrical side.....now start thinking roofs, bricks, insulation etc etc....

And Im sure they would have growth targets aswell...more money back through the back door