Property Report - August 2019


DISPELLING MYTHS ABOUT BUILDING

 

 It is probably the most interesting time to be in the real estate profession. I say this because of the amount of focus and pressure on the industry. 

There is a lot of rumour and speculation about where the market is heading, but unfortunately this doesn’t always come from credible sources. People are tightening their belts, and although interest rates at their record lowest, there are still buyers who are hesitating 

We find the actual problem is not what is happening but the fear of what might happen. While all of this talk is having a general affect, it is young people who are affected the most.

I was reminded of this when a first home buyer couple dropped into the office the other day to ask questions about building. They had spoken to mortgage brokers and banks and had been turned away without any help. All they wanted were some answers. Having a discussion about the cost of building I realised a very important thing: false information can be the difference between a buyer getting into the market and remaining stationary.

I thought it would be helpful to provide some tips and tricks to achieve a cheaper build that might allow you to come in under budget, if considering building. This information is also helpful for vendors. There is a high volume of land on the market at present, and it is important for vendors to recognise that as the perception of increased build costs becomes more common, it becomes more challenging to achieve premium results for vacant blocks of land.

 

Site Preparation & Drainage

A lot of people factor in tens of thousands of dollars for plumbing and water tanks. My advice: get a group of friends together and go to the Seymour Alternate Farming Expo. Buy in bulk and get tanks cheap. Maybe throw in a tank pump and some gutter guard or downpipe filters while you’re at it, if you’re building in a leafy area. This can save you hundreds of dollars, potentially thousands.

Do your research. If you are building in an area with a higher Bushfire Attack Level (BAL) you will need to provide 10,000 L of water for the CFA. So instead of buying 3 tanks, maybe buy 1? Hint: Poly tanks are cheaper smaller, steel tanks are cheaper larger. You will get more bang for buck out of a Rhino Steel Tank than a couple of Bushmans Poly Tanks. But it all depends on the needs of your property.

 

Understand Construction Costs

There is a rumour at the moment that construction costs are increasing exponentially. THIS IS NOT TRUE. I recently spoke with a Sales Manager at one of the larger volume builders and she confirmed that although 12-24 months ago costs were increasing by 5-7% ($3,000 - $4,000 every few months) due to a shortage in trades, right now the increase in cost is relative to CPI at about 3-5%. She also said they haven’t put their costs up for the last 3 months and it’s likely that won’t change for another month. This is because the industry has slowed down.

What does this mean? Builders want your business, and whether you choose to select one of our top quality local builders, or you prefer to go with a volume builder, the time is right to build your first home. Get in touch – we can recommend the right builder to suit your needs.

If budget is important to you, builders like ABC and Simonds are offering $99,000 3 bedroom, 2 bathroom homes + site costs for first home buyers. For other floor plans, budget on about $13,000 per square for a new home. Also, for first home buyers, do not forget that you will not pay stamp duty under $600,000 and will receive $20,000 cash back for building in a Regional Area. This can amount to up to $50,000 of savings.

Tip: the distance surcharge for building in Kinglake and Kinglake West is not as expensive as you think. Give us a call on 5786 2033 and we can help you find out the exact amount.

 

Do Not Overcapitalise

The most important thing to keep in mind when building your first home is to build what you need over what you want. This depends on your future plan, but always imagine that you will have to sell in a few years. That way your costs won’t blow out. Do I need LED downlights? Maybe. But do I need a Caesar stone benchtop? Maybe not. Scrutinise all these little things. As they say, watch the cents and the dollars will count themselves.

 

 

Quick note for vendors of vacant blocks: all of this might mean it is worth spending a little bit of money. Setting up service connections like power and NBN can be an asset. Fencing, although not always cheap, can be a stellar way to establish ambiguous boundaries or simply provide context for a block of land. If you want to do the whole hog, getting planning approval for a house makes a block of land very saleable. Although there is some cost involved, it is absolutely minimal compared to the return you will make upon selling. Remember, without these things we are relying on buyers to do all of this due diligence themselves which can take them months when not motivated.

In summary, it is a really good time to buy land. They always say you never profit off another person’s dream. While this isn’t categorically true of the Kinglake Ranges, because our capital growth rates are so strong, by building you get to control exactly what you end up with and your bottom line.

As always, we find buyers and vendors alike are relieved when they come into our office and ask questions. Our door is always open, so give us a buzz on 5786 2033 and pop in for a coffee before the Spring season starts.