Property Update: How To Remain Profitable When New Builds Decline

It seems everywhere you turn these days there’s yet another article predicting the impending property apocalypse. This isn’t one of those articles. No, we’ve penned this piece today to chat through how the current market conditions affect custom home builders. You’ll notice many of these property updates only really focus on sale prices, auction clearance rates and discounting. Custom builds are a whole new kettle of fish.

Here we want to outline the facts along with a few key strategies you can employ to remain profitable while the real estate market does it’s thing. Here at AREI, we don’t see the point in reporting anything unless there’s a solution ready and waiting.

 

What is the current market telling us?

The ABS Building Report released in November 2018 showed a dramatic decline in construction approvals across all states. When averaged across all building types (houses, apartments, commercial) the decline totalled 32.8% in the last 12 months. When narrowing down the data to show private dwellings, houses dropped 6.4% and all other private dwellings (apartments & co) dropped a staggering 53.9%.

This can be the result of many things. For us, there are 2 key elements that are really steering the boat on these figures. The first one being the tighter lending conditions all Australians (and overseas investors!) are experiencing. Interest only loans, smaller deposits and equity driven loans are harder if not impossible to get right now. For that reason, there just isn’t as much cash floating around.

Secondly, people are nervous. As we mentioned, every media outlet in Australia is hypothesising about the future of our property growth and even the economic wealth in this country. When there’s fear in the market, it’s harder to sell. The results of the Royal Banking Commission is still playing out in Australia so it’s a case of waiting to analyse the full impact the adjustments have made.

We believe your potential clients are still waiting in the wings. In the meantime, we’ve got a few ideas to keep your custom home building business flush.

 

Stay Current

The construction industry is always changing as you’d know. To attract and retain clients, you need to match or stay ahead of your competition. The key trends coming forth in 2019 and beyond in home building are:

  • Technology: many builders are investing in online project management tools which of course, benefit the project at hand but also, the client. Many of these tools allow for frequent build updates which the client can access online. It may seem like a small thing but key client value adds such as this can be the difference between winning and losing a job.
  • Sustainability: with the focus on eco-friendly sustainable homes gaining more traction, ensuring you have viable options for this type of request will drastically improve your chances of acquiring new clients. Everything from building materials, solar options and house plans will need your consideration here. We now offer eco-friendly, sustainable custom house plans which are drawn and ready to be downloaded.

Find Your Niche

If you’ve been in this business for a while, you’ll know that finding new clients takes time, money and resources. Instead of trying to attract everyone and everything, spend some time figuring which projects have been the most profitable in the past. Identify who it was that booked those builds. Really niche this down to include their age, profession, location, family status and more.

This is called creating a customer avatar. One you have a clear idea of who to target and for what, develop a marketing plan to attract them. Put it this way, you can acquire many smaller clients or you can get strategic and book a smaller quantity of larger jobs.

You may also like5 Essential Strategies to Land More Clients’.

 

Run a Lean Business

Even if you’re booked solid until Christmas, it’s always a good idea to plan for the future. It’s even more imperative in a market lull. You’d be surprised at how much you can save just by adjusting your operating expenses. For example:

  • Labour: Watch your sub-contractor labour costs. Are there elements you can take back yourself rather than outsourcing? Can you minimise weekend work to reduce your expenses for a period of time? This is undoubtedly your highest cost so addressing this and making adjustments where you can should be a priority.
  • Marketing: Of course if work is drying up, you’ll want to increase your marketing budget but it’s worth addressing what types of marketing you’re spending on. Traditional print mediums have a low return on investment where digital marketing can be tracked and adjusted for conversion almost instantaneously. Audit your efforts and market with intention. If the billboard is costing $5k per month and you’re not sure if it’s even working, it might be time to take it down.
  • Plans: Another very hefty investment for builders are house plans. If you’re building 5 homes or more per year, you are likely already spending upwards of $12,500 per year on house plans alone. Most architects charge $2,500 or more for a custom house plan. Here at AREI Designs, our Construction Package gives you 5 construction drawing sets PLUS access to over 200 buildable, bankable designs for less than what you’re paying for 5 house plans standalone.

 

Spending only where required and making minor tweaks to your outgoing expenses will help you build a bit of beef in your budget to get you through the leaner times.

 

How have the current conditions affected your custom home building business?

 

Source: https://www.mintequity.com.au/news/severe-slowing-in-housing-construction-forecast-as-building-approvals-drop-by-328

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