Managing Development and Construction Costs in a Changing Market
With the sharp increases in construction materials costs and persistent labour shortages of recent years, property developers are facing a tough decision. Do they absorb the costs and risk lower profit margins, or do they pass on the costs to customers? Let’s look at some of the potential options available to developers trying to manage their construction costs in a changing market.
Manage Costs Through Planning and Forecasting
One of the most effective ways to manage development construction costs is by planning and forecasting. This includes analysing current trends, predicting future cost fluctuations, and budgeting accordingly. It also involves looking at ways to reduce overhead costs through more efficient sourcing methods and cutting out unnecessary expenses. By creating a detailed plan for managing your construction costs, you can be better prepared for any changes that may come your way.
Strategise Purchasing Decisions
Another key area for managing development construction costs is through your purchasing strategy. This means taking into account not only the cost of materials but also their quality and availability—both of which can greatly affect your bottom line. Additionally, it’s important to shop around for competitive pricing to ensure you’re getting the best deals possible on materials. Fixed-price building contracts may be rare on the ground in Australia these days, but you should still negotiate with suppliers and builders whenever possible; even small savings can add up over time.
Take Advantage of Technological Solutions
There are many technology solutions available that can help property developers save money when it comes to managing their development construction costs. For example, cloud-based project management software makes it easier for teams to collaborate on projects remotely, saving both time and money in the process. Additionally, leveraging virtual reality technology during the design process can help reduce errors that might otherwise be costly down the road. Finally, utilising drones or robots for surveying tasks can improve accuracy while reducing labour costs significantly.
Managing development construction costs is no easy task—especially when prices are soaring due to market conditions beyond your control—but there are strategies you can use to minimise financial losses while still delivering quality projects on time and within budget. From planning and forecasting ahead of time to taking advantage of technology solutions like cloud-based project management software or drones for surveying tasks, there are numerous ways that property developers can protect themselves from rising material prices while still providing the highest quality workmanship possible and staying on-track with projects.
MFEG can secure funding for your next development
Our team specialises in finance solutions for property development. We’re proud of our relationships with excellent developers and finance providers. If you’re looking for smooth, hassle-free funding for your next project, get in touch.