Believe me the reason most people are not building is because it is too expensive, Why wouldn’t more property investors be developing and building new houses?

And that in my opinion is why Demand is dropping and basically hasn’t been there in recent years, If all these builders are just ripping everybody off making large profits then why are they struggling to get new builds underway? because all they would have to do is lower there margins to lure home buyers, but the reason they don’t is because they can’t.

Anyway I think all of this has been blown out of proportion, all I was trying to get across in my earlier posts was that the large costs in building new homes is not the result of builders profit margins and certainly not increases in tradesmens wages.

I agree the real estate agents and majority of the big builders are taking everyone for a ride. Initially we were told this story by every real estate agent dont go for construction because of the hidden cost and it will cost much more, interest, delays etc.

Well, we have close friends who have built around Kellyville, Stanhope, Glenwood,Rouse Hill and Newbury (since 2003) who told us what to expect with hidden cost.

Every big builder gave us a site cost of 25K for a flat back block of land except Eden Brae. Eden Brae said the site cost would be max 1.5K because the block is flat and they have built several homes in that area . Their price the same but did not include the driveway, ducted ac and fencing. Infact Eden brae gave us an estimate that came close without the turn key package.

This builder said the same and the only variation will be the peering. Yes he has included the BASIX in the contract and everyone who has gone with them are very happy.

In fact he was recommended by the sales lady at Landcomm based on feedback by many customers. Also, the colorbond sales lady looked at what he was giving us and she said it was good, his BASIX for the colorbond roofing was the top most range.

Even Wincrest and Avjennings saw the initial estimate and said it was pretty good they were willing to throw in some freebies like either ducted A/C or extension of the the slab concrete slab at the back and front porch for no extra cost.

I can definitely vouch for the quality and floor space mate because my dad had been an Architect/Interior Designer for 40 years and can distinguish a quality finish from the lousy work that most big builder charge. Infact my Dad did the plan and most builders would charge us 25K extra for a custom plan. If you are talking about the outside build the options are ecobrick with rendered finish, Austral or PGH bricks, CSR Monier Horizon tiles or Colorbond roofing. By the way I even got a quote of a double brick home from him and it was far less than the 24K quote I got from the other builders.

I hope to start a blog when construction starts and document every stage of the project then everyone here can see who has been taken for a ride?

Are you telling me that a project home builder with the buying capacity 100 times than that of your upcoming builder can’t give you a better price, You got to be kidding me mate where are you looking? Yes please see my post above.

why are new building approvals dropping then? Well this was the case before the 24K grant was introduced and just after it was announced and then going up because of the effects of FHOG and low interest rates. With the full FHOG already elapsed and further to trimmed I believe this trend will continue with coupled with high interest rates. Please note I have always said here the cost of existing home jumped by almost 70K before the grant in this area because of the stimulus and people consider the 450 to 550K an entry market so there has been strong demand just because of FHOG. Most people I talk to dont prefer to build because they have been scared and brainwashed by the real estate agents and MSM.

And I agree that Land prices are still the major component of the high prices considering the profit margins of builders to be a small component.

I sorry mate but I don’t know who you are talking too, but they are taking you for a ride. For starters how do you know with only 1 1/2 years experience in just talking to builders what you are truly getting in relation to quality of production, true floor space ratios?

I mean have taken in to consideration the cost of BASIX alone wich has added 10% – 15% on a new build since it was introduced.

Are you telling me that ba project home builder with the buying capacity 100 times than that of your upcoming builder can’t give you a better price, You got to be kidding me mate where are you looking?

@ 239 why are new building approvals dropping then?

Why live in kellyville when you can live in balmain?

Furthermore the above statement is totally false with my research and own experience. Existing homes were around 30K extra to buy with lesser bed rooms and options( e.g is ducted ac, extra 2 bed rooms, bathroom or an extra bed room and media/study room) In fact it costs around 30K extra for a 3 bedroom house compared to building say a 5 bedroom house. Of course you can deduct 10K in interest over the course of construction so it comes out to 20K. This is the reason a lot of people went for building new homes because it did not make any sense to pay extra for what you could build for. I can provide with more details to back up my experience. I do agree that probably the land component(landcom/government)is the largest chunk of the price and everything is set to deliberately maintain property prices.

I can tell you that they have a decent profit margin. We did all our research and went for an upcoming builder who charges 30K less than the big builders and he is providing better alternatives (brick, ecobrick, tiles, colorbond) and quality (toilet tiles till the ceiling, better flooring, kitchen…., alfresco, driveway, landscaping, fencing, ducted aircon all included. The other builders only provide the basic house for 30K more everything else is extra.

You would be looking at 25K~30K for the extras. there is no way for him to be surviving on a thin margin and a loss is out of the question. I have been dealing with builders for 1 year and 6 months. Cant understand why big builders increased their houses by 20K after the stimulus while an upcoming builder charges 30k less for the basic and in total around 60K less. You got to be kidding me mate.

In relation to big developers/residential project home builders, of course with any corparation large executive pay outs are a drain on profits, but from what I can see as I have many friends in the project home industry is that these companys rely on a huge turn over on very large estates to make a decent profit,( One house after the other )buying materials in bulk and srewing sub contracters down to the bare minimum.

But even after all of this these guys are not making anywhere near what they used to, In my opinion the demand just isn’t there, the cost of a new build now exceeds the cost of buying an exsisting house in an established area.

Basically the builder and the consumer are both getting screwed
with the government, property investers and real estate agents riding this thing all the way to the bank.

PS by no way am I saying that project home builders are the good guys either, there quality of work and basic ethics are shocking at the best of times!

I see your point, It would be interesting to see a chart of ‘net debt’ with our super balances and like assets counted against the debt.

I have read that the USA has a net debt, that is the richest country in the world has less savings than it owes. Can anyone confirm this? I wonder if Aus is in the same situation…

Thanks for the information. I appologise for the clumsy accusations in my previous post. I suspected that there was a large cost imposition on the building trades. (insurance was a prime suspect)

Do you believe that the big developers are realy struggling to make a profit on the job, or is the profit disappearing into ‘overheads’ like executive pays?

I’m looking at the Mirvac annual report: http://media.corporate-ir.net/media_files/irol/14/144042/mirvacar.pdf

Which margins in particular are you referring to? I’d like to take a closer look to see which factors may be impacting their margins and whether they are isolated to only land + development + building (on the expense side) and sales (on the income side).

Thanks.