Property costs in NZ - the heart of evil

[BoristheBiter]

The spec builders make you sign a contract at the start of the process saying you'll accept responsibility for variations submitted at the end of the process. The only spec builder without this clause in their contract is Platinum Homes. Interestingly, they all make you pay $2-$3k to purchase this contract. They call it a deposit. In reality it is the salesperson's commission.

Yes but you have sign off on variations or, like ocean1 said, you just laugh in they face.

[Ocean1]

The spec builders make you sign a contract at the start of the process saying you'll accept responsibility for variations submitted at the end of the process. The only spec builder without this clause in their contract is Platinum Homes. Interestingly, they all make you pay $2-$3k to purchase this contract. They call it a deposit. In reality it is the salesperson's commission.

Why would anyone sign a contract that allows the supplier to change the contract price at will? I'd be very interested in what a CC lawyer had to say about it. I'd be even more interested to know why they hadn't said it sooner.

Just another example of providers conspiring to control the market, and to tell you the truth you don't have to see such detail to know it's happening, if you've got even the sketchiest idea of the real costs of supply you can see the rot at a thousand yards from the end user prices.

[Brian d marge]

Just a quck note
I have a house here in tokyo （ 30 min by train from city centre) it cost 15 million yen to complete with all mod cons , irs 2 story town house with 3 bedroom 2 toilets and open plan kitchen living room . . . . It is all wood and came from a factory.
The framing went up in a day , from memory 3 month from start to finish
Stephen

Sent from my SC-01F using Tapatalk

[BMWST?]

Just a quck note
I have a house here in tokyo （ 30 min by train from city centre) it cost 15 million yen to complete with all mod cons , irs 2 story town house with 3 bedroom 2 toilets and open plan kitchen living room . . . . It is all wood and came from a factory.
The framing went up in a day , from memory 3 month from start to finish
Stephen

Sent from my SC-01F using Tapatalk

Three _4 months would be normal in nz.most houses are prenailed,so a small house would have the frames up in a day,then the trusses,another day,then if the roofer was available the roof would be on,so not at all inconceivable to have a bare slab monday with a house with a roof and building wrap at the end of the week.

[BMWST?]

Land. $150k for a freehold 500m2 section in Greytown. So you're at $350k with no council approval, no interior finishing, no driveway, no garage, no fencing, no paving, no clothesline, and no utilities connection fees, no furniture, no curtains. There's no mention of kitchen or bathroom appliances and fittings or carpet. There needs to be heating and ventilation systems in their too. The council charges $6k per utility to hook it up and reserves the right to inspect the build at any time at your cost of $148/hour. So we'll call that $15k. $365k. Driveways work out at between $10 and $15k per 20m of single width paving over here. We'll go conservative with the driveway and paving and say $50k. $415k. Garage. A single Ideal with a concrete floor and workspace is about $25k if you want power and water. $440k. Houseload of shitty carpet that will need replacing in 5 years. $8k. We'll budget $2k for the inevitable carpeting fuck ups. $450k, INterior finishing, $20k, $470k. Basic bathroom, $5k, $475k. Basic kitchen pack and appliances, $15k. $490k, Curtains - really nasty ones, $2.5k. $492.5k. Section fencing, basic 1.5m timber, $20k. Landscaping and plants, basic, $5k, so we've already creaked over $500k. Don't forget to add the magic council fees to get compliance for all the things they didn't tell you about before you started and you can add an extra $5k for that minimum. Then there will be all the stuff that plumbers and sparkies get wrong during the build that you have to call people back to fix. The original tradepeople magically disappear along with their work standards guarantees so you have to pay again.

Building a house may not be rocket science. Fleecing a "customer" is down to a fine art in NZ though, from the council to the decorator, as is hiding all the building variables in post-build variations invoices. If you don't budget $600k for that build, you're an idiot. You then end up with a house that will have an RV of $420k and a market value of $340-$380k, depending on how desperate the vendor is to ditch the debt lemon they just built.

We've gone into this in detail, and decided that if we build, we have to stay in it for 20 years, planning for one major boom and bust cycle during that time, to start making money on any house build "investment".

No.the $1400 sq m is for the house finished.land drives garages,utilities etc on top.its not just a shell.

[BMWST?]

With any increase in the number of units built there's a point where the cost drops dramatically. It's the point at which you're no longer behaving like a cottage industry and start behaving like a production facility.

Glazing units, for example in NZ are made to order, whatever size you want. Takes a week or so, which is actually pretty good for what amounts to a jobing shop. Everywhere else in the world glazing units are manufactured as stock, standard sizes which cover 95% of all residential demand. Prices in NZ are also pretty good, for the service you get, but compared to a glazing unit factory the cost-to-market is fucking appalling. Like over twice the price.

So when I see what should be very promising developments along those lines for complete builds offering "up to 15%" cost savings I have to ask where the other 20% -30% is going...

http://www.stuff.co.nz/business/indu...s-cost-savings

Just why the fuck is it that nobody seems able to deliver anything in the residential property market for anything vaguely resembling cost-to-market plus a reasonable margin? Seriously, why?

Thats a good question.it cant be for lack of trying.a large part of it is alluded to above.there is no scale.every house is different.even the likes of keith hay homes didnt.manufacture their own houses

[James Deuce]

No.the $1400 sq m is for the house finished.land drives garages,utilities etc on top.its not just a shell.

Can't see it happening. Sounds like bullshit fairyland rubbish to me, because it will neuter every spec builder in the country, unless its building code is worse than the Philipines. We've seriously gone into every spec builder in the Wairarapa and the cheapest 140sqm 3-4 bed house is in the mid to late 400s providied you sacrifice driveway and fencing and buy a 500sqm section. I'm not making it up. Therefore I simply don;t believe your assertion. You'll have the whole building industry in NZ collapsing if they introduce that.

[Woodman]

Anyone here actually tried to buy a small house in a good area? We tried and it was damn near impossible and ended up with a place that is way too big for our needs. We looked at building at the time, but small was off the radar in relation to covenants etc in the area we wanted to live.

They have you by the short and curlies really. Who influences the rules around size of houses the most? Councils, developers?, builders?

[BMWST?]

Can't see it happening. Sounds like bullshit fairyland rubbish to me, because it will neuter every spec builder in the country, unless its building code is worse than the Philipines. We've seriously gone into every spec builder in the Wairarapa and the cheapest 140sqm 3-4 bed house is in the mid to late 400s providied you sacrifice driveway and fencing and buy a 500sqm section. I'm not making it up. Therefore I simply don;t believe your assertion. You'll have the whole building industry in NZ collapsing if they introduce that.

Its a new initiative,and one of my regulars customers is convinced he can do it.BUT
They will be relatively small no frills boxes 120 to 140 sq m max

[BMWST?]

Anyone here actually tried to buy a small house in a good area? We tried and it was damn near impossible and ended up with a place that is way too big for our needs. We looked at building at the time, but small was off the radar in relation to covenants etc in the area we wanted to live.

They have you by the short and curlies really. Who influences the rules around size of houses the most? Councils, developers?, builders?

Market.people want 200 250 sq m complex shspes it seems ,and most developments are set up so that thats all that gets built in that area
There will be minimum room sizes set down somewhere,but I bet it's not the building code delivering 250 sq m housed

[Brett]

The spec builders make you sign a contract at the start of the process saying you'll accept responsibility for variations submitted at the end of the process. The only spec builder without this clause in their contract is Platinum Homes. Interestingly, they all make you pay $2-$3k to purchase this contract. They call it a deposit. In reality it is the salesperson's commission.

Not in ANY of the many building companies that I have worked with/for (although for the last 6 or 7 years I have only project managed/built houses for myself - so times might have changed). In the building companies that I have worked for, prior to entering business management, we always agree'd variations at the time and got them approved. They were paid for in the payment claim for that portion of works - ie deposit, completion of slab, midfloor framing up, roof on etc. depending on how the contract was set up. Never were costs accrued and bulk invoiced at the end of the project. I also wouldn't sign a contract where I don't know roughly what the end bill is going to be. Cost management needs to occur right across the project duration.

Re: desposits, they are necessary to help manage the cash flow of the project. Where it goes wrong is when the building company use it fund other projects which they have priced wrong, are being on payments with etc. Yes, some of it is the salesman's commission, however not a whole heap. Any business has head office overheads to cover as well, this is a fact of business - even building houses. Don't like it, then build it yourself - but don't be surprised when you aren't happy with the architect or architectural designers services, can't get tradesman or only get poor quality workmanship, hit issues with council over missed building inspections or not getting engineer sign off on items as required or miss important technical details. I have been exposed to this industry since I was 10 years old through my parents. I have seen how the industry has changed...there is a lot more challenge involved in designing, permitting and building even just a basic house these days and as long as red tape continues to get worse, it will only become more challenging. This is the opportunity/cost that potential home builders need to weigh up.

Also - those claiming that building companies are creaming it on the margins - think again. Times have and are tough out there still. Not as bad as they were, but still highly competitive. Costs of tradesman now (assuming building companies aren't using cheap imported labour - something I do, and always have, refused to do myself.) And the driver behind tradesman rates? Supply/Demand and compliance costs. To fix: increase labour supply through good apprenticeship training (as the work picks up over the next few years) and reduce beaurecratic red tape.

Personally, I believe land prices are part of the killer. As long as land remains as expensive as it is, it is going to be challenging to build a new house at what many people consider to be an affordable price - talking about suburban areas in main centers - you can buy a big block of land for $150k if you're willing to live in a remote area.

[Brett]

Market.people want 200 250 sq m complex shspes it seems ,and most developments are set up so that thats all that gets built in that area
There will be minimum room sizes set down somewhere,but I bet it's not the building code delivering 250 sq m housed

IMO to get a reasonable value of house at the end of the day for the average family, you are looking at around 220m2. I have many plans around this size that I use/have used for 4 bedroom family homes. They are designed to optimize space and simplify the building structure to eliminate the more expensive structural elements, complicated roofing designs etc. that come from complicated houses. Managing the build myself and sourcing all materials I can build for $1240 + GST per m2 including basic landscaping. Still look like (and are) high quality houses. Last one I did was last year.

[BMWST?]

IMO to get a reasonable value of house at the end of the day for the average family, you are looking at around 220m2. I have many plans around this size that I use/have used for 4 bedroom family homes. They are designed to optimize space and simplify the building structure to eliminate the more expensive structural elements, complicated roofing designs etc. that come from complicated houses. Managing the build myself and sourcing all materials I can build for $1240 + GST per m2 including basic landscaping. Still look like (and are) high quality houses. Last one I did was last year.

Cant get much simpler on shape than that.i am intrigued by this value propasition.granted two sections in the same area are the same price,but surely a two bedroom house will be cheaper than a 4 bedroom house

[JimO]

Cant get much simpler on shape than that.i am intrigued by this value propasition.granted two sections in the same area are the same price,but surely a two bedroom house will be cheaper than a 4 bedroom house

not much, there is fuck all in a bedroom, a bit of extra concrete, gib and roofing, if you had a price for a 4 bed house then told them to price a 2 bed there would be fuck all difference, adding 2 bedrooms to a existing house is a different kettle of kippers

[Brett]

not much, there is fuck all in a bedroom, a bit of extra concrete, gib and roofing, if you had a price for a 4 bed house then told them to price a 2 bed there would be fuck all difference, adding 2 bedrooms to a existing house is a different kettle of kippers

On the mark to a degree. The cost apportionment per m2 of xtra space is an awkward one. Bathrooms, Kitchens and rooms with lots of services are much more expensive per m2 than space that is little more than foundation and extra roofing. However, there are knock on effects if your not careful. That extra 1m width on a living area that is 5m long may only be an extra $500 of foundations and maybe $500 of roofing etc. but it could say cause you to have to upgrade joists or roofing beams because the span of the structural members has gone beyond what lower cost materials can handle, thus requiring steel beams, laminate timber beams etc. This principle can affect almost any area in a house. As with anything, scales of economy do help beyond a certain size, but equally, there is also a base cost component that distorts savings at a low house size - without considering any structural adjustments required due to building proportions.

It IS possible to build a small but nice and efficient 2 bedroom home for around $1200 per m2, but it takes knowing what is required to achieve this. Similar principles apply to commercial buildings as well.