Joel Winders, commercial director of Kingswood Homes, relates the challenges facing developers when it comes to sourcing materials – and at good prices.
One of our biggest challenges over the recent years has been procuring materials; firstly, at the right price and, secondly, in timescales that work with our programmes: something which rarely has gone hand in hand.
We have battled with multiple world events that have impacted on the housing industry by way of rising costs and lack of supply. Prices rose like a rocket from 2020 – 2022 and have fallen like a feather in 2023, and while supplies now become readily available, there is a lack of demand. It appears on face value that merchants and suppliers are not passing on the price reductions as fast as their historic price increases which were filtering through daily at the time.
Kingswood Homes is a well-established SME but, as is the case with all SMEs, we do not have the same buying power as the large PLCs, which ultimately means we have to fight harder to secure the best rates and periodically review prices to ensure we are receiving best value for money.
Our approach, which we have found rewarding to date, has been to open dialogue with our supply chains to re-negotiate existing deals to try and negate re-tendering processes which secures continuity on developments and ongoing relationships with existing supply chains.
The cost efficiencies we are making with the market slow down are being focused on delivering better value for customers through increasing the sales team’s incentive allowances in a bid to increase reservation numbers to somewhere in between what feels like a period of feast or famine.
Customer expectations have also increased when it comes to closing the deal with expectations of a sales incentive margin of anywhere from 1% to 5% of purchase price. This is something that we review on a plot-by-plot basis.
While there is a lot of doom and gloom in the industry, we have been encouraged with the continued reduction in mortgage rates as the market continues to stabilise and inflation continues to reduce to a palatable level.
This has been very encouraging for our sales outlets and in the early part of 2024 we have seen customer numbers increase significantly, although many potential buyers are still hesitant to commit or put their house on the market, presumably holding off until they feel the market has bottomed out.
A key driver to kickstart the industry again will be the welcomed reduction in the Bank of England base rates which are predicted to reduce by 1% by the end of 2024 which will have a large effect on commercial lending and residential mortgages alike. Without this we could continue to see future sites moth-balled and delayed in a bid to reduce the effects of the downturn with the goal of coming back stronger in the future.
