Wait Now, Pay More Later

There has been a lot of discussion about record increases in the price of real estate over the last 12 months, but there is a more pressing issue that strata owners need to be aware of – the rising cost of construction works.

A combination of booming demand, labour shortage, material shortages and supply chain disruptions are creating the perfect storm for increased construction costs.

According to CoreLogic’s Research Director Tim Lawless, the heightened construction activity and rising costs experienced across Australia won’t be going away soon, and will likely cause affordability challenges for owners across the country.   

“The quarterly rate of growth in construction costs is happening everywhere and is not restricted to one city or state, it’s a national trend,” he said.

“This construction cost inflation could continue for another 12 to 18 months. It’s unlikely the industry can absorb a cost increase this significant into their margins and higher construction costs will ultimately be passed on to the consumer, placing further upwards pressure on the price of a new dwelling or renovation.”

Already we’ve seen just how much pressure is being placed on the construction industry, with Probuild and Condev both going into liquidation in recent weeks.

In short, costs are going up and the construction industry is buckling under the pressure.

The More You Delay, the More You Will Pay.

Owners corporations who choose to delay any rectification, maintenance or uplift work on their property may be setting themselves up for a shock later on.

Regarding funding of any works, the corporation always has three options:  to accumulate a Maintenance Fund over time, to have a Special Levy or to Borrow (or a combination of these three methods).

It takes time to accumulate moneys in a Maintenance Fund.  Special Levies should be a quick solution but will be delayed if there are owners who find the cash flow impost too large.

A strata loan is immediate, unsecured and does not involve a mortgage, personal financials or guarantees.  

What’s the Right Decision?

As with any big decision, it’s important to be informed. If your clients are looking at rectifying defects or considering maintenance or renewal/uplift projects over the next few years, it will be important to discuss with them the implications should they choose to delay the works.