In today’s world we are experiencing rising costs in all aspects of life, but how can we handle this? Rising housing costs can be attributed to external factors such as the rising costs of materials, the rising cost of finance and inflation.
In this blog, we are going to help you understand the causes of the rising housing costs and what you can do to combat the issues.
How You Can Combat These Issues:
- One way you can combat rising prices is to hold a formal review of your real estate portfolio each year to identify new ideas for cost savings. This is important as it ensures that each year, you’re staying on top of keeping your costs down, especially if you have a growing portfolio as it will allow you to keep the costs low on all properties.
- Conduct an energy assessment on each site. This will allow you to diagnose areas that may not be running efficiently and are causing unnecessarily high costs.
- Have a clear idea about your financial situation. Make sure you know exactly how much you’re spending, what you’re spending on and how much you’re earning.
Rising Material & Labour Costs:
The biggest shock to the property development industry is the rising costs of materials and labour. Since Brexit, statistics have shown high fluctuations in material costs and as the cost of living continues to rise, so does the cost of building materials.
This graph shows the general increase in costs of all groups of materials including, steel concrete components, aluminium products, metal structures and timber. BCIS shows that some fundamental construction materials such as timber and steel have increased in cost by around 80%.
These rising costs are making it more and more difficult for property developers to make a sustainable profit on their development projects. Unfortunately, there appears to be no let off for developers, with material costs not looking to decrease any time soon.
With many property developers requiring outsourced help for larger construction works, most developers would team up with a team of labourers. However, as the price of labour continues to increase – this option is no longer affordable for many developers.
Inflation And Costs Of Finance:
Inflation reached 10.1% in July 2022. The first time it has registered a double-digit annual increase in more than 40 years!
This is bad for property developers because it erodes the value of future returns on any investment into property. With its high uncertainty, which disrupts the economy’s pricing systems, it becomes hard to determine your accumulated investment earnings.
It can mean higher mortgage/ borrowing rates as central banks will start to fight inflation rates by raising interest rates which may put off borrowing from both banks and lenders.
How Can We Help?
We understand that it is now more important than ever for developers to make quick and proactive decisions. Due to this, we provide fast, agile funding solutions with an agreement in principle within as little as 48 hours.
So, if you require the funds to begin your next development project – speak to our friendly team today.