The current property market: Opportunity or threat for your real estate business?
The answer is simply both!
According to the latest BCIS five-year forecast issued on 10 March, the wider economy is unlikely to fall into deep recession, but stagflation is perhaps the best that can be expected.
High inflation and interest rates will prevail, causing the economy to shrink slightly in 2023. Although the housing sector is predicted to decline sharply other sectors should hold up.
Labour costs will replace materials as the main cost driver for projects and they forecast that over the next five years the availability of work will see tender prices slowly rising too.
If you speculatively acquire land or property to develop, you always need to be certain of your costs - and even more so in the current climate.
When the market is stalling or even slightly down turning, assets that might not otherwise have reached the open market will become available to purchase.
However, knowing the right price to pay is crucial to success.
The best way to make the most informed decisions about your land or property purchase is to have a strong team behind you.
A key player in your team must be a quantity surveyor.
A Quantity Surveyor will provide you with cost advice from the early stages through to delivery of your project. They have the skills and access to the latest construction cost market rates to guide you and can help you set out the most robust procurement route to manage your risks and help you keep control of your costs.
The question to ask is how you can procure construction works whilst avoiding market over reaction from your supply chain who may raise their prices to offset their risk of labour cost inflation hitting their bottom line.
HLG Associates have the solution to this dilemma.
We work with developers to manage their costs following the direct labour procurement route. This is proving to be an extremely successful way through these market conditions.
Whilst under the traditional firm price tender approach, the project cost certainty is obtained at acceptance of the tender, the cost reimbursement route must rely on the skill of the employer’s quantity surveyor to know the “should cost” for work. They must set budgets upfront and ensure you meet them. We work closely with the delivery team to monitor and track expenditure of labour and materials to make sure the project is delivered on budget.
Until the labour gap is resolved, this can offer a highly effective way to deliver your project and avoid receiving inflated tender returns from contractors anxious about the market conditions.
At HLG Associates, we have a strong team of quantity surveyors in Jersey and Guernsey. We have supported projects in the Channel Islands for over 10 years, giving us a strong grip on the local market.
With our knowledge of the construction market pan-island, we use our relationships with some of the best construction operators in the market to bolster your chance of success.
Get in touch today for a confidential conversation about your next property project on +44 (0)1534 888135.
Alan Renfrew, BSc MRICS, Associate Director Quantity Surveying, Jersey
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