What to do with construction projects in financially uncertain times?
You’ve been dreaming for ages of that large refurbishment and extension you’d like to undertake to your property. You’re longing for more space, a beautiful garden accessible through an open plan kitchen/diner with that large natural oak table for 16 guests. You have some good savings sitting in the bank and the house is due to be remortgaged soon anyway. But you read the news and all you hear is interest rates are rising and the market is playing crazy. So what to do?
This is a situation I hear quite often recently and I completely understand the anxiety and scepticism people are feeling.
In addition to the crazy market, experts seem to be saying that we can’t learn from past financial experiences because everything happening now is very different to what has happened before…
This is neither helpful nor hopeful. And yet, I believe there are some mindful steps people with ambitions for their homes can consider in these uncertain times:
Rear ground floor extension in Highgate
The cost of building materials increased drastically after lockdown and then rose even more when the war in Ukraine began. How much of these price increases are also due to Brexit, I will leave as a conversation for others. It’s fair to assume that if you’re planning to start work on your property this summer and your initial estimates are from April 2022, you’ll see a significant increase in the latest builders’ quotes.
According to the Office of National Statistics, the price of construction materials in the UK in April this year was almost 5% higher than the year before. And according to the FT Weekend 1st July edition, construction material prices are now around 43% higher than they were in 2020. This is bad news for those of you still considering your property development, but I have something positive for you at the end of this article.
However, if you haven’t started your development just yet, I’d say you’re in quite a good position for a couple of reasons:
First, the construction costs are the biggest spend in a construction project but they are not the only cost. Other other related costs such as consultants and legal fees haven’t increased that much in the last two or three years.
And second, between the first day you speak to an Architect to kickstart the process of your property development and the day the construction work starts, there will be at least a 6-month gap. I’m calling it a gap but in reality, it’s a very busy time for your design team and yourself. Here’s a list of what needs to happen in that 6 month period:
Establish your brief, i.e. in detail, what do you wish and expect from the development of your property?
Develop a design proposal and approve it to be submitted for planning.
Submit plans and documents for planning approval. Estimated time for the council response is a minimum 10 weeks, including validation time.
Prepare technical plans and documents for construction.
Tender the work to obtain quotes from different builders companies.
Choose and appoint a contractor.
Here’s the good news - you can appoint a design team for all of this without any stress and time pressure, and then see what the market is doing.
And more good news - the planning approval your Architect obtains for you is valid for three years. That means you have up to three years to start work on site, which is plenty of time to see which way the economy is going.
This stage of the project is financially low risk because every consultant will provide you with a fee proposal, so you know from the beginning how much you will need to invest.
Also, to expand on my point about consultant fees, while the fees of Architects and other consultants have increased slightly over the last 3 years, they certainly haven’t increased by 43%!
For those of you who are stuck in the process now and anxious about construction cost prices, make sure your planning approval doesn’t expire.
Check when planning was granted for your proposal and if the three years are about to expire, contact your Architect and ask them to apply to extend the approval period. This will protect you from doing some of the work twice, spending additional time and money.
New kitchen in new rear ground floor extension in New Malden
As you can see, even in uncertain times you have options:
If you are planning to do work to your property, start the process and go through the initial steps. The expenses are predictable and consultant’s fees have remained fairly stable over the last three years.
If you have planning and are waiting for prices to adjust, make sure the planning approval doesn’t expire by requesting an extension
If you have any questions please get in touch, I would be happy to chat with you.
