Struggling to buy your next home?
Well, what about half of one?
Buyer interest in half-built properties has shot through the roof (if the home has a roof yet) in recent months as savings-savvy Aussies look for ways to tackle the nation’s housing crisis.
And with Australia’s property availability problems showing no signs of abating, the high-risk strategy of purchasing half-finished homes has given bargain hunters hope of finding a great deal in an otherwise dire buyers’ market.
Economic experts have warned Australia’s housing crisis is expected to get worse before it gets better, with material costs, a tradie shortage, and construction company collapses, seeing Australia already fall behind on its goal of building 1.2 million homes by the end of the decade.
Last month, Build-it revealed construction material costs, while stabilising, were still increasing, and sitting a third higher than before the Covid-19 pandemic.
Meanwhile, two more companies that made up a major Queensland construction firm collapsed late last month, leaving nearly 1000 creditors owed more than $80 million.
It’s those repeated company collapses and cost spikes that have led to a wave of half-finished homes, forcing homeowners to cut their losses on properties midway through completion or during a major renovation project.
Cash-tied homeowners and investors are left with little capital for the new builders, materials and trade services needed to complete the job, leading them to sell at discount rates.
Experts warn against property gamble
While good news for those willing to gamble on buying an incomplete project, but Queensland-based property expert and @Realty agent, Joel Lo, says that purchasing a half-finished house can be a risky endeavour.
“One of the primary concerns is the potential for unforeseen issues and additional costs,” Mr Lo told Build-it.
“Without a clear understanding of the project’s status and the quality of work already completed, buyers may encounter hidden structural, electrical, or plumbing problems that could require significant time and money to rectify.”
Mr Lo told Build-it that it was essential for prospective buyers to conduct thorough inspections, consult with experienced professionals, and carefully assess the potential risks before committing to such a purchase.
“if the project stalls or encounters unexpected setbacks, buyers may find themselves responsible for covering additional costs out of pocket or facing delays in completing the construction,” he said.
“Conducting thorough due diligence, exploring alternative financing options, and having a contingency plan are essential strategies for mitigating these risks and ensuring a successful investment in a half-finished house project.”
Savings still worth the risk for some
However, some say DIY-loving buyers still see the half-builds as a deal too good to turn down.
Selling agent Andrew Boman from Ray White Mt Gravatt has been inundated with enquiries from builders and families who see the property as a bargain.
“With how hard it is to get a builder at the moment, even having a house at the frame-up stage has been appealing because you’ve already started the process as far as earthworks, roofs and frames go,” he told realestate.com.au
Mr Boman said part of the appeal for buyers was acquiring the property at a substantial discount compared to a finished home in the area.
“The appeal is getting a brand-new house, even though they have to finish it, at a price that works for them,” he said.
Tactic attracting tradies
While the budget-hunting hack is attracting significantly more interest, most of it is from those with a wealth of DIY home renovation experience or even tradies themselves.
The risks of purchasing a partially built property still seem enough to put off most buyers who can struggle to find someone to finish work someone else started due to legal and insurance concerns.
Not knowing what they’re taking on leaves the new owners susceptible to significant costs if major structural damage or risks are found during completion.
And with more than 1,700 construction companies entering administration between July 2022 and April 2023, there’s always a chance new buyers could find themselves in the same situation as the previous owner.
Australia’s peak industry building association, Master Builders Australia, has been trying to boost the number of firms available to complete incomplete projects.
“Master Builders and its members have been working closely with other industry participants to ensure there are builders and tradies available to pick up projects in the instance of insolvencies,” Chief executive Denita Wawn said.
“The good news is more businesses are entering the industry than going insolvent, so it’s not all doom and gloom.”
However, Ms Wawn urged homebuyers to exercise caution when considering the purchase of an incomplete home.
“Ensure the developer and builder have all the right checks and balances in place, including insurance, the contract is fit for purpose, and you have an appropriate buffer for any unexpected events or delays,” she said.
