Wednesday, 28 August 2013 12:00 AM
If you’ve been looking into building a new home through a homebuilding company you would have noticed a large number of companies offering discounts, added extras and sometimes outrageous incentives to entice investors to purchase a home.
I have come across some fairly enticing offers in the past few weeks; ranging from cash discounts of up to $50,000, home deposits, luxurious holidays or cars, to free reverse cycle air-conditioning and landscaping offers and my personal favourite, cooking lessons with an ex-MasterChef Australia contestant.
I understand why homebuilding companies are desperate for business. Despite homebuilding approvals rising 0.5 per cent in February the market is still low.
Offering cash back, financing deals and added extras are used as bait and are for the industry’s creative response to a poor market. For property buyers, these incentives are not always the best way on to the property ladder.
As CEO of a homebuilding company (G.J. Gardner Homes), with over 110 franchises in operation—our franchisees sometimes offer deals to homebuyers. But these are limited to deals sourced through existing relationships with local suppliers, developers or by reducing costs slightly. Offering bait such as $50,000 cash back or payment of deposits, to me indicates a shortcut or hidden cost.
I believe us builders should be focusing on producing a quality home for their buyer; not luring them in to offers they can’t refuse. Think rationally: building homes costs money—can you see a builder paying for a holiday or new car when the market down and profits are already tight? Someone is paying, believe me!
It’s important for buyers to think smart and remember, like most things in life, there’s always a catch. If it sounds to good to be true, it probably is. Just like any business, homebuilders are in the game to make a profit and give a return on investment so what might seem like an incentive for property investors might just be a shuffling of costs.
Giving away large value offers could mean the business is running with low or no profit, which has the potential to end in tears if the business fails before completing your home; or they are recouping their profit somewhere else. If it’s not in the initial price, then it may be in commissions or royalties from third parties, such as finance, or variations and extras they can get in.
The incentives could be a cut of estimates in order to get business and the home could end up costing more money and time if the company has under quoted. When builders change from what they provide as standard specification it could mean the buyer is purchasing a product at a higher price an could be opening the door for possible further variations.
There are so many variables when building a home so it can be difficult to find out a final building price, and it’s easy for builders to dodge the question. It’s important to ask the builder for costs of soil tests, site surveys, levels and a detailed property report that will help get the correct price. In addition, the buyer should ask for fixed costs, with upgrades included, before paying a deposit—while they are still hungry for business.
Homebuyers must look at a deal objectively and not be drawn in by the incentives. What’s important is purchasing an investment for the right price. Do research and look at it as an overall property – not just one that comes with free extras.