The housing market has always had its ups and downs, but of late, as well as recent fluctuations in house prices, many homeowners have not only had house price depreciation to worry about, but additionally the progressive collapse of the UK economy.
Too bold a statement?
Well let’s look into this a little further! If we look at trends over previous years, the economy has had many a shaky moment causing great concern for UK citizens, and one only has to cast their mind back to the recession of the 1980’s, where house prices plummeted and repossessions were occurring every other day.
Sadly with the UK’S current state of affairs, many analysts are now predicting that our economy is heading for even greater devastation than our last recession and believe things have never been this catastrophic since the big collapse of the world’s economy in the 1920’s.
Banks have gone bust with Lehman Brothers sending the markets into turmoil and here in the UK, we have already lost Northern Rock, Bradford & Bingley are scraping the surface and Alliance and Leicester have been sold to Santander. This is just how bad the economy is right now and massive borrowing from the banks has not helped in the slightest.
Gordon Brown has vowed that he will never allow a British Bank to collapse but at the rate it is only anyone’s guess as to what may happen next.
So What Does This Have To Do With The Title of This Post?
Well as builders, a great proportion of our work is dictated by the housing market, sales and prices etc. If the market is booming then there is greater demand for new houses and therefore greater demand for builders or tradesmen to build them.
Large builders are now feeling the crunch of this economical rollercoaster and for the most part, have stopped building newer developments and subsequently let go much of its workforce. This has now caused many ‘site workers’ to look for work in other areas and many of these site workers are now engaging in the private sector.
A couple of years back, homeowners may have had about 2 or 3 tradesmen quoting on jobs they needed doing, but as of late, there may be 5 or 6 tradesmen all chasing the same jobs and making the market highly competitive. On a recent survey we conducted, 4 out of 5 consumers said that in light of the current economical turmoil we are facing, with job losses and cash reserves being tighter, when it comes to giving a job to a builder, it would be price that dictated any assignment and a case of ‘whoever gives the cheapest quote’.
While this may seem beneficial for the customer, it is absolutely dire for many builders as they are now dragged into this price war of perhaps having to work for a ridiculously lower price just to try and land the job. For larger companies with bigger overheads etc, they will simply be in no position to compete and will have no option but to decline any prospect of the job.
The Cheapest Quote May Also Be The Most Expensive!
Just to land the job, a more inexperienced builder may not be prepared to stick to his guns and quote for the price the job is worth, but instead, go in at a much lower price in the hope they will be able save on costs on the job and still remain profitable. This is a foolish gamble to take!
If a builder has priced the job correctly he will know exactly what price margins he has to work to and will have accounted for much of the build cost precisely. To then go and try to take shavings off this price in order to just ‘get the job’ is IMHO, absolute madness.
This is not only bad for the builder himself but also the customer, for they may be catching a falling dagger!! There may be builders who will realise they have priced the job completely wrong and will then try to cut corners to get back on track. This may mean shoddy workmanship and more than likely the use of lesser materials in order to recoup costs. If they are lucky they may even get to finish the job! So in the long term, it may end up costing the customer more than what they bargained for.
I write this post halfway through December 2008 and hope for many builders and consumers alike, that 2009 will bring greater prosperity in light of the current credit crunch. My gut feeling and honest opinion however, is that at this point, I fear the UK markets and economy have further to depreciate and the worst is still yet to come. At least in the short term that is.
What Say You? I’d love to hear your views and thoughts!