Aug 11, 2008:
Drastic increases in building materials have affected developers' profits, with some planned developments having to be scrapped and the future of others hanging in the balance.
And those planning to build their own homes have either had to increase their budgets, scale down their plans or scrap their dream home altogether.
Seeff Properties managing director Andy Todd said developers who had launched their projects 12 to 24 months ago have found that their profits have been significantly cut, and in some cases wiped out, as a result of the huge increases in the price of raw materials.
Todd said a development project in Hout Bay had to be scrapped recently as the building contractor who was contracted to build reneged on the agreement as rising materials costs made the job unprofitable.
Further building tenders would have also resulted in a major loss for the developer had the project proceeded at the original unit sales prices.
Amdec Property Development regional director Magnus McDowall said the firm had "definitely" been feeling the affect of rising building costs over the last three years, resulting in increasing construction costs.
McDowall said profits were thinner as rental and sales prices could not be increased by the same percentages but had to remain within current market values. The costs of steel and timber were particularly burdensome, he said.
Even retailers had been affected by a resultant decrease in sales.
Builders Warehouse regional trade buyer Denver Mintoor said steel had gone up by 80%, timber by 20% and sand by 9% over the last eight to nine months.
Campwell Hardware financial manager Fairoz Osman said lower income housing growth had been particularly hardest hit as the price of corrugated iron roof sheeting, which was the most commonly used roof sheeting used on low income homes, had escalating alongside the increasing price of steel.
He said that sales on this item had dropped by 15% over the last six months.
Osman said the price of cement had increased by 6,25% on the 1st of January this year, and again on July 1 by 7,25%. This had caused sales to drop and would result in large contracts being postponed, house renovations being cancelled and home owners and builders not being able to implement their plans. – Yugendree Naidoo, West Cape News