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Property Financing: 4 Ways House Builders Can Cut Costs

COVID-19 has hit many housebuilders and developers hard over the past year. Supply chain issues and construction site closures have caused both starts and completions to be delayed. In March 2020, many of the major house builders in the UK sent workers home to keep them safe, despite the Government advising construction sites to stay open. 

Add to this the soaring cost of building materials, and it’s no surprise that many housebuilders are looking for ways to cut costs and seek out alternative property financing

Read on to find out how you can reduce your outgoings when the budget is tight and cash flow is unpredictable.

1. Pass Some of the Extra Costs on to the Customer

This may seem like a no-brainer, but many housebuilders are wary of raising prices for customers, especially at a time when people are experiencing financial difficulties. You don’t want to lose a buyer and send them running to a (cheaper) competitor, right? 

If you have built a solid business reputation, produce quality housing and deliver excellent customer service, a small increase in prices is unlikely to deter buyers. Be transparent about how you value the properties you build and why you need to set higher asking prices. The cost of imported timber has gone up by 80% in the past six months; copper and steel prices have increased by 40%. With these types of price hikes, passing some of the cost on to the customer is inevitable. 

And don’t forget, demand for new homes is currently at a record high and property prices are soaring across the board. So buyers expect to pay more for their dream home. Furthermore, a lot of people have seen their spending shrink dramatically in the past year. Savvy house buyers will have banked this money to put towards their next move. A recent study by the Centre for Economics and Business Research (CEBR) revealed that Brits have accumulated a staggering £192b worth of lockdown savings since March 2020.

2. Rethink the Materials You Use

Run an audit of the materials you use regularly and have planned for future developments. Are there any alternatives that are more easily accessible and lower cost that won’t result in a significant reduction in quality? For example, can you switch from imported materials to products sourced in the UK, which have typically not increased in price so much over the past year?

Now is the time to tap into the network of business contacts and suppliers that you’ve spent years building up. Your working relationships can help you to identify new sources of affordable materials, adapt to a more efficient strategic approach and develop creative ways to overcome supply chain problems. 

3. Consider Outsourcing Key Services

Managing everything in-house can be resource and labour intensive. You also risk higher costs due to the inefficiencies that can result from staff working in areas where they have limited experience.

Consider reducing costs by outsourcing specialist services. For example, hire an asset manager to take care of sales or partner with a part-exchange property services company that can provide the expertise necessary to keep a purchase moving if your customer has problems selling their existing property. 

Working in collaboration with specialists will enhance business efficiencies, reduce costs and improve the customer experience. All of which means lower costs and a higher return on investment. 

4. Reduce the Number of Change Orders

If a customer requests last-minute changes to a property, this invariably means that costs increase — materials may be wasted, extra labour hours are used etc. 

Take the time to communicate with your customers and provide all the information they need to make key decisions early on in the building process. Establish open lines of communication so that buyers can discuss possible changes with your team as soon as possible. 

Make use of the technology available to you. For example, can you create virtual walk-throughs of the property before building work is completed? The more opportunities you give buyers to visualise the end product and raise queries early on, the fewer last-minute change orders you’ll receive.

HBB Solutions works with new home builders of all sizes throughout the UK. Our guaranteed purchase, chain repair and part-exchange schemes will help you to save money and keep your development plans on track if your buyer encounters difficulties selling.

Request your free consultation today