New building at 16 year low - useful for negotiating price?

moxie · Sep 28, 2012 11:28 am

Read in the paper yesterday that new home building permits are at a 16 year low. Does this actually translate into buyers being able to negotiate with builders? There is a lot of competition here in Melbourne. Has anyone successfully negotiated a reduced price after receiving their quote? A couple of friends who are private builders reckons the margins are huge and 10 - 20 % off is nothing!

springtime · Sep 28, 2012 4:27 pm

Hi Moxie,

Wow, 10 -20% off, if you could manage that , then you've got it made!
You'll find though most builders will be very reluctant to shave off anything off the contract price, but some will throw things in to sweeten the deal, e.g free flyscreens, or kitchen upgrade.

bashworth · Sep 28, 2012 4:44 pm

Might help with the price of land!

chripark69 · Sep 28, 2012 4:48 pm

I couldn't get anything off my land and negotiated very hard with my builder and got $10,000 discount plus $4,000 of upgrades, also got a lot of spec changes etc for minimal cost. In the end a real good deal, a bit cheesed off though as my builder is now offering these discounts as standard in WA

zeitgeber · Sep 28, 2012 7:52 pm

If they give you $10K off, they will find other ways to get it back from you by eg. cutting corners somewhere else or by reducing quality (2 coat paint instead of 3. Hard to tell if you r not a pro).

They were not born yesterday.

springtime · Sep 28, 2012 7:58 pm

So true, it's because they have a profit margin, & no matter what they have to make it to stay in business, lets face it, do you honestly think anyone can reduce the cost of anything by $10K-$20K as a good will gesture?....doubt it very much :th:

stellabella · Sep 28, 2012 8:05 pm

I agree with bashworth - negotiate with the land. Our block was listed at $119k and within a day we got it for $107k. If there are a lot of options around and the blocks have been on the market for a while, there will be a lot of room to move on the price.

MalinViktoria · Sep 28, 2012 8:41 pm

We reckon we'll be able to get the price down a bit on the land we're looking at, will put in the offer in the next few weeks $6k under listed price. The builder, however, I've tried really hard to give us a better deal, but nothing seems to budge them. We even have to pay extra for frickin' EAVES on one side of the house, I couldn't even get them to give us that for free no matter how ridiculous it is that a house comes with eaves on 3 sides only. Not happy about that. ::frown::

Acey · Sep 29, 2012 2:23 am

Profit margin on land must be pretty huge.

Land in parkland heights just went up $15-20k now the builder offers you $10k off the price of the house. (builder owned division)

free will · Sep 29, 2012 7:26 am

With iron ore and other commodity prices falling, companies are putting off staff many of whom would previously have worked in building industry. When they start trying to fine work in the building industry, then you might find contractor rates start to fall and then project home builders will pass on some of that.

In terms of profit margins, of course these could be shaved, but you need one of the big builders to lead and start cutting and then the others will have to follow. But no one wants to lead as everyone ends up losing........

ant022 · Sep 29, 2012 11:26 am

Just about every business I know works on supply and demand. If site starts are at a 16 year low and continue to fall then prices will have to come down. The theory of keeping prices up to sustain a good margin is bad business if it serverly effects turnover which it will in this market. The building industry has had it very good for a long time and it will be interesting to see what happens now. My guess is the smart operators will be ok while others will struggle to survive.

TomCat · Oct 03, 2012 9:04 pm

Agree with you ant. I see it that a builder can make a $50k profit (rather than his usual $70k on each build he's done over past 16 years) or nothing - coz I'll find a builder who will seeing they all need the work at the moment. And the one that accepts a lower profit can clean up on all the jobs; winning all work from the ones refusing to budge. Of course you can negotiate - everything in life can be negotiated. Some people just don't know how to. I think its healthy to always be conscious of being gipped - puts you on guard so you're less likely to be (so you manage it). :wink:

chripark69 · Oct 03, 2012 9:19 pm

zeitgeber

If they give you $10K off, they will find other ways to get it back from you by eg. cutting corners somewhere else or by reducing quality (2 coat paint instead of 3. Hard to tell if you r not a pro).

They were not born yesterday.

I'd like to think I got a good deal as I also work for a house builder and let them know very early doors what I did for a living, so when I specked the house up I knew their suppliers and got rates so I could see what their margin was, which was in my opinion fair and reasonable. With regards to paint I told them I wanted three coats plus an oil based sealer to start. Like an earlier post said the main profit is in the land and as its a house land package I got the discount must of come from the land side.

The market is quieter than normal and IMHO you can negotiate extras more than cash discounts from the builder.

free will · Oct 03, 2012 10:18 pm

From the SMH today - looks as though we sharpen up our negotiation skills

New house sales fell to a 15-year low in August, underscoring the mixed picture for the housing market, a day after the Reserve Bank cut interest rates. The Housing Industry Association new home sales report fell by 5.3 per cent in August, after a 5.6 per cent drop in July, led lower by a "persistently weak" detached house market. HIA said new house sales fell 5.8 per cent in August, while apartments fell 2.5 per cent. "New home sales for August are the latest in a string of soft new housing updates for this financial year, and that follows a very weak year for new home building in 2011-12," said HIA chief economist Dr Harley Dale. "Indeed, following two consecutive years of decline in new housing starts over 2010-11 and 2011-12, and leading indicators pointing to weakness extending into 2012-13, policy settings in August 2012 were clearly inappropriate." The Reserve Bank cut rates yesterday to 3.25 per cent from 3.5 per cent as signs emerged that the mining boom is stalling and that the domestic sector is struggling. By city, new house sales dropped 7 per cent in New South Wales and 8.6 per cent in Victoria. They dropped 2.9 per cent Queensland and 2.6 per cent South Australia. In Western Australia, they plunged 9.4 per cent in August.