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In today’s volatile economic landscape, where future interest rates are fluctuating and the cost of living is on a steady climb, you’re probably asking yourself: Is now really the right time to invest in building your dream home?
Amidst such uncertainty, waiting for lower house prices can be tempting. However, understanding the real dynamics of the housing market is crucial before making such a significant decision.
As someone who's been in the trenches of home building for over a quarter-century, I've seen plenty of market cycles. Yet, not once have I witnessed a genuine downturn in the overall costs of constructing a home.
This experience underscores a simple truth:
Once They Have Risen, Construction Costs Don't Tend to Fall Back Down
Contrary to what you’ve been told, the best way to pocket a substantial saving (like the $50,000 cash ‘discounts’ some builders spruik) isn't through a gimmicky promotion. It's by locking in your construction plans now, rather than later.
With prices consistently on the rise, delaying your build not only costs you more as each year passes. Think about it: Currently, inflation is galloping ahead at over 7% annually, significantly impacting the construction sector.
This surge means the real cost of building materials and labour is climbing much faster than most people realise. If this trend continues, the price you'll pay for delaying your project could be much steeper than you anticipated.
Will Lower Interest Rates Make Building a Home More Affordable?
While it might seem logical to assume lower interest rates would make building a home cheaper, the reality can be quite different. Reduced interest rates often lead to easier lending conditions, sparking a surge in demand for new homes.
This increased demand tends to push prices up, not down, as people are able to borrow more money. Therefore, if interest rates were to drop, instead of seeing a dip in the cost of your future home, you might actually witness an increase due to heightened market activity.
The reason behind this is simple: the cost of a home isn't just about the price of the plot or the design — it's heavily influenced by the cost of trades and materials.
Currently, both are subject to significant inflation.
Tradespeople are in high demand and short supply, leading to increased wages that builders must pass on to consumers. Similarly, the cost of materials has been steadily rising, further adding to the overall expense.
With no signs of these pressures easing, waiting on your project could see you facing higher costs as these elements continue to climb.
Every Week You Delay Will Cost You More
If you're looking at building an $800,000 house today, waiting another year could increase your costs by 5 to 10%. That's an extra $40,000 to $80,000 just for hesitating.
Given the current trends in the housing market and the construction industry, the message is clear: if you're thinking about building your dream home, the time to act is now.
Delaying your project in anticipation of falling prices is likely to backfire. Don’t let the potential for minor fluctuations in interest rates lead you astray; the broader economic indicators all point towards escalating prices.
If you're ready to build your dream home without stepping into the popular potholes, it’s important to be well-informed. And there’s a lot more to know - that’s why I created this quick guide for you to download.
Build with Confidence - 7 Things You Must Know Before Designing a New Home
It’s completely free, and it will help you avoid many of the traps that homeowners fall into.
