Are you considering building your dream home in 2024 but are worried about the market conditions?
Are you apprehensive of the rising interest rates? Or are you simply just holding out, waiting for things to settle down?
With so much negative information about the construction industry circulating in the media, it’s easy to feel overwhelmed and hesitant about taking the leap into your building project.
So what can you do to prepare?
Choose The Safe Option
There’s a lot of uncertainty in the construction world right now. And big companies are bearing the brunt of the whole situation. You may have begun to lose trust in these household names and it has caused a domino effect throughout the whole industry.
According to the Australian Security and Investments Commision, In the 22–23 financial year, 2,177 Australian building companies went into liquidation. This is more than double than the next closest sector. This reveals the harsh reality of the current financial stress many companies are facing.
The issue lies with the larger volume builders, who have overcommitted to projects and are now facing the price rise and supply issues to deliver on these fixed price contracts.
Professional small builders, conversely, have risen as the heroes of the construction world. This is because they didn’t over commit to new contracts and they are now through all of the issues that the volume builders are still facing. This means that they are now working on profitable projects and can deliver on what they say they will. These small professional builders are proving to be the safest choice for your 2024 project.
The True Impact Of Interest Rates
Interest rates have been on the rise, and you may find it even more challenging to borrow the amount needed for your project. You may even be unable to manage the additional costs related to the increased mortgage stress.
To overcome these issues, it is essential that you maintain a clear understanding of your financial capabilities and that you remain mindful of inflation and the potential increases in interest rates when determining how much you can borrow.
It is important to note that while current interest rates may seem high, the reality is that they are actually just returning to a range most people consider normal after an extended period of being exceptionally low. The interest rate in Australia has remained fairly stable over the past 20 years. From 1997 until today, the cash rate has remained roughly between 4% to 8%.
When undertaking a large scale project, you are likely to take out a loan and it’s important to acknowledge that interest rates can be quite dynamic throughout this extended timeframe. Don’t be disheartened if the rate seems higher initially, as it’s bound to fluctuate significantly over the course of a 30-year loan. In fact, a mere 1% increase in interest on a $500,000 loan translates to less than a $100 weekly difference, highlighting the manageable impact of rate changes in the long run.
Inflation & A Trade Crisis: Its Effect On Your Project.
Inflation surged in Australia in 2023 and resulted in an increase in material costs. This is a trend that was initially driven by COVID-related supply and demand challenges. These increased prices are adding to the overall cost of construction and putting further pressure on Adelaide homeowners who want to build in 2024. Additionally, the scarcity of skilled tradespeople is posing challenges for project timelines making it hard for builders to keep their projects on time and on budget.
It sounds pretty bleak, but there is a solution.
While we can’t change inflation, professional small builders are mitigating the skill shortage crisis by maintaining their relationships with subcontractors, who represent well-established, enduring businesses. These partnerships guarantee the stability you need in the middle of a trade shortage crisis, ensuring your project stays on time and on budget.
Inflation is part of our economic cycle and it’s something we are all experiencing. By delaying your job in hopes to miss the effects of inflation is like trying to time the share market. Instead of putting your project on hold, hoping for better days, seize the opportunity now because this will be your best defense against the rising costs caused by trade shortages and inflation.
Collaborate With The Professionals
It may be tempting to pinch pennies especially given the current economic situation. However, keep in mind small professional builders have managed to adapt and flourish despite the volatile trends in the industry. They are well equipped with the knowledge and experience that will help guide you in navigating the design phase successfully.
To ensure a successful 2024 project, collaborate closely with professionals to achieve your vision of your dream home, while staying within your budget. While challenges exist, with thorough research and close collaboration, you can confidently pursue your dream home in 2024.
For some inspiration for your 2024 project Download our FREE Design Guide.
