What type of buyer gets the most out of the current market?

 

Who wins right now? It’s the question everyone is asking.

Who makes the most out of building in the current market?  In this article we examine 3 types of clients who may build. The way to view who wins right now is to look at each group and what they are trying to achieve and what the current market provides them;    

  1. Mums and Dads building their long term family home    
  2. Those building to sell and build bigger and better later    
  3. Investor / professional developers.  

Choosing the right time to buy is difficult but choosing the right the time to build, that requires some real thinking.

Mums and Dads

Mums and Dads are wanting to build the long term family home. Their objectives are;  

·          finding the right area

·          good quality design and build

·          good but not rapid build time

·          Capital growth is important but the time frame is 10+ years.

So a Mum and Dad considering to build a family home now, have access to;

·         low interest rates, 

·         reasonable prices on blocks of land, even if that means demolition

·         they have competitive build prices,

·         access to the best trades doing quality work.

·         build times will be good.

Because they have a longer term time frame, they aren’t interested in instant capital growth but rather what suburb is right for them and their family.  

Mums and Dads = Winners

Building to Sell – The resellers (or flippers)

These buyers are looking to get into the market, build a nice home but on a budget and sell so they can perhaps upgrade into a better one in a few years. Working in their favour is;

·         interest rates are low

·         ability to find a good deal on a knock over property

·         access to competitive building prices

What’s working against them is;

·         The established market may not grow enough to get uplift

·         Their land and build price might be above the established market

·         Banks willingness to fund spec builds without large equity

Resellers = Probably wait  

Investors and multi unit builds

Investors are looking for the prices at completion of their projects to be higher than the cost to build now and also with a margin built in. Working in their favour is;

·         interest rates are low

·         Some blocks are on the market at less than previous sale

·         ability to find a good deal on a knock over property

·         access to competitive building prices

·         Not a lot of new projects starting.

What’s working against them is;

·         The established market may not grow enough to get the uplift in price they need.

·         Their land and build price might be above the established market

·         Banks willingness to lend on developments

·         Lower rental returns to create buyer demand

Investors = Maybe, it depends

For those investors who’ve owned their land for some time and without a lot of debt. Now could be a good time due to lower number of competing projects on the market by the time theirs finished. They’ll also get good access to building pricing and timelines and have the margin built in by virtue of their original purchase price.