WE all hear about supply shortages and cost increases hitting the building industry. This naturally causes hesitation for new buyers considering getting into the market.<\/p>\n
But while the impact of this building cost increase is a reality, it\u2019s still true that the best time to build a home is today.<\/p>\n
Why are we experiencing cost increases?<\/em><\/strong><\/p>\n The combination of increased demand due to low interest rates and government grants, and supply shortages of materials due to the pandemic, has strained the building industry over the past two years.<\/p>\n Rising fuel, electricity and freight costs, as well as raw material shortages globally, have had a direct impact on the cost of construction.<\/p>\n Due to signing fixed priced new home contracts, builders have worn this cost increase on their bottom lines, creating \u201ctoxic contracts\u201d which have little or no profit remaining even before construction starts.<\/p>\n The long-term impact on costs<\/em><\/strong><\/p>\n It\u2019s na\u00efve to think that costs will decline. Labour and material costs have always risen, normally in line with inflation. What we\u2019ve seen is an acceleration of this increase due to unprecedented demand, material and labour shortages.<\/p>\n With inflation rates rising globally, and interest rates rising nationally, there is still a direct impact on new home construction costs even as we stabilise access to materials.<\/p>\n However, housing is only half the story. The increase in demand has evaporated any land ready to build. This has led to price escalation on land allotments that simply prices buyers out of the market.<\/p>\n Then there is rent. As buyers find it more difficult to buy or build there is pressure on the rental market \u2013 meaning rentals are harder to find and rental prices will continue to rise.<\/p>\n This makes owning your own home more important than ever.<\/p>\n