So, you bought the land a year ago, having done some of your homework on costs, mortgage, running costs, etc. You even got a quote for building the house.
Now, you’ve all your ‘ducks in a row’, and ask the builder for a date to start.
“Ah, cliente, the costs are a little more than last year”
Uh oh! “How much?”
And after going through everything with your project manager, who’s working for you, not for the builder or architect, you find it headlines at +48% in one year. That’s the experience of one, but I’m sure it’s not an exception.
It’s extreme, but 25% seems to be the standard expectation of many now. Basic raw materials are the big problem, like iron, aluminium, glass, concrete, etc. and that’s if you can even get them. Logically, why should the supplier sell them to you today, when, in a couple of months, they could get much more for the stuff already in their warehouse. So that’s hoarding to be added to the basic shortage.
Building contracts are now only ‘fixed price’ for 7 days or at most a month. They all have clauses such as ‘any increase in material costs of more then 5%, will be passed on to the client’ Or even simply, any increase in material costs will be passed on. Development is coming to a screeching halt as builders, developers, bankers, architects, insurers, yes, and even building surveyors and valuers, try to make sense of the situation.
Logically, new build properties must go up in price, but they are already much more than resale properties. Existing properties must now be worth more, as the alternative is either more expensive or not being built at all.
And what of the people who have put down a deposit or even substantial part payment on and ‘off-plan’ apartment? The builder can’t build at the previous price, so goes to the developer to renegotiate. The developer is stuck between agreeing and the work carrying on, or refusing and the builder walking off site and saying sue me, I’m bankrupt either way. Then the developer goes to the buyer of the apartment and says it’s going to cost 10% more. “Oh no it’s not”, says the buyer. “I have a contract. I’ll pull out and you’ll have to give me all my money back plus interest”. So, the developer goes to the architect and changes the spec to the absolute minimum, knowing he’s going to have a fight when the buyer has the property inspected by Survey Spain when it’s declared to be finished, and there’s a long list of defects and changes to the promised finishes and equipment. But by that time he’ll have his money and can just delay and delay until the buyer gives up.
It’s a real mess, and like so much in the world today, nobody knows how it’s going to turn out. It appears that we are certainly afflicted with living “in interesting times”.