Why is it that whenever house prices go up... the price you can charge to build a home remains the same?
The only time your price goes up is when materials or labour increases… So where is all the extra money going?
The answer may shock you.
If you are a builder and you’re wondering why house prices are being deliberately driven upwards, and more importantly, who is gaining from the increase, read on.
At the end of this article, we’re going to reveal who is really making the money in this industry, and they’re not even builders!
Something is not quite right in the residential construction industry… It’s not been right for some time.
Let’s look at house prices. When the price of a house goes up, it’s not because the cost to build went up, it’s because there was surplus money being made available by banks for consumers to invest in property.
Supply and Demand
When there is more cash available, there are more consumers trying to buy the same house. There is still only one house so the price goes up.
Conversely, when the banks tighten up on spending, there are fewer consumers who are able to buy... and even fewer who are able to pay a premium. So the price goes down. Supply and demand... it’s at the heart of everything.
So, let me ask you, who wins when prices go up?
No chance! Unless, of course, they are already using the APB Sales Process.
To a degree. But they’re not the real winners.
When the price of a house goes up by 10%, the cost to build is largely unaffected… which means it’s not the house that is going up in value, IT’S THE LAND.
Think of it this way...If you were to buy a car with a boat hooked up to the rear, how much is it worth? How would you value it?
Well, you’d find out the market value of the car and add it to the market value of the boat. It’s the same with a house, the land has a separate value to the building.
And if a home is worth $1m and the cost to build is $650k that means the land is valued at $350k.
If prices increase by 10% and the cost to build remains the same, that means the value of the land just went up by $100K... A whopping 28%!
So let me ask you this… who wins when land prices go up?
It’s The Land Developers!
Because when the price of land goes up by 28%... that’s pure additional profit.
Which means they’ll create more developments, put in more infrastructure and create more jobs in the construction industry by generating the opportunity for more consumers to build.
Now that may sound all fine and dandy... only it’s not.
Because builders are being deliberately prevented from charging a fair margin by unfair competition.
Builders that trade insolvently or price jobs below cost due to a lack of education are being allowed to compete with professional building companies unchallenged for one reason, and one reason only…
To artificially drive down the cost to build.
Because when the cost to build goes up, the value of land goes down. It has to because the value of a home is directly linked to the availability of finance in the market.
So you may be thinking, “Yeah, that may be true but the land developers have no control of the finance market.”
And you’d be right.
So I urge you to think bigger, who stands to gain from manipulating the economy?
We have no proof, so this is just another conspiracy theory.
It started out as a bit of a joke, why are building companies being allowed to trade insolvently in Queensland while the ……………….……… turns a blind eye?
We thought they were incompetent, but recently we’ve been given information that points to something far more sinister.
Nothing we can print, so like I said, this is just another conspiracy theory, but this information came from the very top, and it answered some questions we’ve been asking these past four years.
If it looks like a duck, walks like a duck and sounds like a duck... take notice.
It’s No Accident, This Game Is Hard
It’s been designed that way. But that doesn’t mean you have to be a victim.
Start by learning how to price your jobs correctly. It’s not about adding a margin to your cost price. That’s a sure fire way to go bankrupt!
Learn how to read your financial reports. I guarantee that when you do you’ll start valuing your time a lot more and you’ll stop doing variations for free.
Figure out what makes your building company special. We deal with thousands of builders all over the world and every single one is unique... don’t think you’re not.
Start targeting the good clients and eliminate the problem clients. You’ll spend less time working and you’ll make more money.
And learn how to present a quote. No one is going to spend hundreds of thousands of dollars with you based on a 3-page estimate.
If you start doing these 5 things, you’ll transform your building company in just 90 days.
To help you get started we’ve mapped out the sales process for builders step-by-step.
Click on the link below and model it in your building company today!