The Unconditional Blog

The impartial voice of the industry

 
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The Joneses (part 2)

Posted on: February 20th, 2008 | Filed in Media commmentary, Real Estate Industry

I am personally surprised by the lead article on the Herald today titled “Joneses had loss of $6m on books“. The articles quotes Brian Gaynor – a regular contributor to the Herald with the following comments:

He issued a commentary on the collapse, saying the liquidation should give a clear message that entrepreneurs had to take a long-term view when contemplating listing.

He also criticised the role of independent advisers who had valued the company, raising questions about the report prepared by WHK Corporate Finance on January 30.

What surprises me is what is the big story? – this reverse listing was supported by a detailed prospectus and analysts report to which he refers. This was public information (I got a copy) – anyone proposing to invest would have received this information and made a judgment as to the risk in investing. For Brian to say “entrepreneurs had to take a long-term view when contemplating listing” is a little bit stating the obvious, that is why they are entrepreneurs.

Also in making a headline of a “$6m loss” and saying $3.2m had been spent on marketing as if this was inappropriate – their business model needed heavy up front investment – this is what they did, pretty clear I thought.

I also don’t think there is any grounds to criticise the analysts, they put a future value of $14.4m – it was a future value based on future sales and revenue and to criticise them for that is a bit illogical.

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The Joneses – a review of their impact on real estate in NZ

Posted on: February 18th, 2008 | Filed in Real Estate Industry

the-joneses.jpgThe Joneses ambitions and impact on the NZ real estate market ended today with the removal of their website and the notice to vendors that they had placed the operation in the hands of a liquidator. Just 18 short months ago The Joneses burst onto the real estate scene in flamboyant style very much reflective of the background of the key directors Chris Taylor and Andy Haines whose expertise in consumer goods’ marketing showed through so well in the very much in-your-face advertising strap line of “Flat fee – Not fat fee: Real Estate Reinvented”.

In a rather prophetic foreboding of today’s notice the prospectus for The Joneses reverse listing on the NZAX was titled “Reinventing Real Estate” some might say a rather work-in-progress judgment on their ability to truly reinvent real estate.jones-profile-document.jpg

The Joneses were an agent-of-change negatively impacted by the combinations of a weakening property market and grand plans requiring too great an up-front investment for the original shareholders to fund.

So what was right about The Joneses and what was wrong – here is an opinion piece from an interested observer’s point of view as I have watched their progress over these 18 months.

The proposition for The Joneses was a simple as it was compelling – Chris Taylor explained it to me a year ago. He said – “5 years ago the average commission on the average NZ property sale was around $6,000 – the industry at the time was successful. Why then 5 years later when costs have not markedly increased do commissions now total $12,000”? – it was this premise that drove to The Joneses offering of a flat fee of originally $7,995 – recently increased to $8,995 to sell any home regardless of selling price.

The fixed price was not the only point of difference to traditional high street operators, The Joneses took true customer service to the heart of its business – they chose to employ their staff, rather than adopt the industry tradition of commission based salespeople who are all independent contractors. The Joneses premise was employ capable people. Pay them a good salary. Motivate them through incentives based on customer service and utilise skills efficiently for employees to work together in teams. There is a specialist salesperson to seek listings. A specialist negotiator to aid the transaction process. There are dedicated marketing individuals and a central call center come customer management center providing one point of contact for sellers and buyers alike.

The Joneses model is or was by no means unique. Its closest relative is Foxtons in the UK – this hugely successful real estate company puts the same focus on consumer service and brand marketing, it has been around for over 25 years and currently lists over 40,000 properties for sale or rent per annum. They like The Joneses employ salespeople and motivate them for exemplary service. foxtons-uk-offices.jpgThey have a highly web-centric service environment complemented by smart customer friendly high street meeting places (the word office does not do it justice). Their fees are scale based reflective of property selling price but are equally a lower fee than traditional real estate companies.

Now the interesting deeper parallel between Foxtons and The Joneses is the fact that based on the success in London, Foxtons ventured to New York state in 2004 with a staggering offer to the US public with their new breed of real estate pitched with a 2% commission on sale – remember the US market is traditionally a 6% commission market with a buyers agent and sellers agent each getting 3% to facilitate the sale. Now as a function of the US market and high overheads Foxtons in the US closed its doors in September last year putting 500 employees out of work.

So what did The Joneses get wrong?

I believe their weakness was a function of the current market, not their model. Unfortunately time was not on their side. If they could have had another 12 months of a steady market to build brand value and establish word of mouth then their ambitions could have been realised. They offered a compelling proposition of professional service and powerful brand advertising, the latter would have become deeper ingrained in the consumer’s mind within another year. There have been questions raised as to the quality of their service and people’s acceptance to the use of a call center when people expect to be able to speak directly to the listing agent who is working on behalf of the vendor, but given time these would have been minor issues.

What The Joneses got right was their ability to grab the media attention and this they did to great effect at the time that the government was seeking input into proposed changes to the real estate act. They showed a fresh and appealing face to an industry that is seriously in need of a make-over. They set about offering a clear offer at an affordable price. The fact is the numbers though did not stack up.

Reviewing their prospectus document of just a month ago showed that over the period from Sep 06 to Nov 07 they achieved a total sales of 433 properties grossing them $3.5m – as at today they had 297 listings on realestate.co.nz spread across the 4 major centers of Auckland, Wellington, Christchurch and Dunedin. With a staff of 80 employees though; the pressure on The Joneses to deliver sales was critical as the break-even point was around 125 sales per month, not an insurmountable target which would have represented a 1.5% market share, however hard to attain in a slowing market when you have yet to change entrenched mindsets borne of many decades of established practice by the major franchise groups.

As a closing comment I think it is to the credit of all the directors and staff of The Joneses for having the passion and commitment to “give it a go”– and as someone pointed out to me today when was the last time a high profile company went into liquidation and you find the major shareholders and directors prepared to front the media. I can’t recall Bridgecorp fronting up!

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Is NZ facing an impending property crash?

Posted on: February 17th, 2008 | Filed in Buying / Selling a home, Media commmentary, Money Matters, Property Investing

As has become the norm over the past 12 months the newspapers and TV are cluttered with articles prophesying impending doom as NZ property teeters on the brink of a property collapse – the questions is – are the reports and prophecies going to become self-fulfilling or is rational sanity going to prevail?

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The facts are very clear, the property market has slowed significantly and prices are not rising as fast as we have been accustomed to over the past 2 or 4 years. However it is a fact that over 5,000 properties were sold in January so clearly there are people looking to make that step and buy property, equally there are over 57,000 properties currently advertised on this site (There are currently 53,300 homes and 9,600 lifestyle property listings on the site, within this are multiple listings of a single property as properties being sold by more than one agent are advertised separately) – clearly this indicates that there are sellers looking to move for whatever reason.

It is a well known fact of any market, be it property or shares or any commodity that in-spite of the trend there will always be buyers and sellers entering the market for differing reasons, it just may well be that the current property market is more interesting to seasoned professional investors with ready finance who are keen to seek bargains rather than a year ago when it was more likely to be less well informed opportunist seeking to “jump” on the property band-wagon.

A couple of articles have sighted the rise in the listings of mortgagee sales on websites, this is true for realestate.co.nz. Currently we have 100 properties featured as “Mortgagee Sale” – a year ago we had 63. Does that mean that we are seeing a 60% increase in the prevalence of mortgagee sales? – there is no statistical proof. Mortgagee sales happen all the time for many reasons and whilst there is no doubt many property owners (not necessarily home owners as the properties concerned may be speculative investment properties) are suffering under increasing debt it is not close to the scenario in the US. The situation in the USA was driven by the most lapse of financial systems and fueled a mega-surge in new property development which is mostly where the pain is being felt right now.

Rather than look to the US for the prediction of where the NZ property market might end up, I think it is better to examine the UK market as the picture there is surprisingly similar to NZ – possibly a few months ahead of us.

UK house prices fell for the third month in January by 0.1% to 180,473 ($451,200) (as stated in a recent Bloombergs report), however they still show a 4.2% increase over this time last year (NZ year on year prices are up 3.97%). Already interest cuts are being predicted of between 0.25% and 0.5% over the next 6 months as the credit crunch has impacted on the economy as a whole and property in particular.

Despite this situation, the UK market is predicted to see prices to drop by around 5% in 2008 – a realistic picture given credit tightening and the current trends. This I would judge to be a rational prediction rather than the NZ snake oil merchants parading as property market experts who talk of 25% falls in prices. The UK property market is underpinned by the same foundations as the NZ market – their economic outlook remains strong, demand for property far outstrips supply and they have low unemployment. Just last week the Royal Institute of Chartered Surveyors stated :

“In the near term, the housing market will continue to be shielded from significant price falls while employment conditions are strong”…”if mortgage lenders filter the recent interest rate cuts into the market, demand should begin to increase”.

For NZ we face continuing high interest rates, it is unlikely that we will see cuts in these rates until the 2nd half of the year when there will be a fierce competitive battle again as large component of fixed term mortgages come up for renewal, this however will be in the middle of the election campaign which traditionally is a slow time for property sales.

So as ever interpreting all this information is difficult as just with Lotto if we knew the future we would win every week! – however it is realistic at this stage to say that the indications are for a very slow property market in 2008 – sales well down on 2007; with the likely hood of property prices of property ending the year at or just below the levels today.

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Transitional market

Posted on: February 13th, 2008 | Filed in Market News

Greetings again – There has certainly been alot of media attention towards the state of the New Zealand housing market with predictions of doom and gloom becoming the norm. In my opinion, alot of this has been taken in reflection upon the rampant market boom of the last 6 years, when in reality we are just returning to a normal balanced market. Statistics do tell facts and things have slowed down with houses taking longer to sell, but generally if a property is priced well and presented and marketed to the right people then a great result can still be achieved. It can actually be a great time to get to the next property rung on the ladder, because if you are buying and selling in the same market then to upsize is comparatively cheaper ie if prices drop 5%,  a $300,000 house equates to a $15,000 fall where as a $400,000 house means a $20,000 drop. Fortunately for we Wellingtonians our market is fairly stable historically with enough government activity generated in our public sector to keep our local economy  and the housing market moving ahead.

I am interested to see this shared equity scheme the Government is rollling out in July and what effects it will have for the market and response from first home buyers.

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Shared equity / shared risk / shared reward??

Posted on: February 13th, 2008 | Filed in Money Matters, Real Estate Industry

The announcement today of the government’s proposed initiatives to deal to the issue of housing affordability seems to be generating a unanimous negative reaction as judged by feedback mechanisms of various websites. Whilst I think there is a general consensus that addressing affordability is a laudable goal the proposed idea of shared equity is entirely flawed as a solution.

Far from achieving the stated aim of supporting low income families attain the home ownership dream as expressed in the prime ministers speech it would clearly create a further rampant speculation in the housing market sucking in further demand to an already restricted supply market (see the blog post on 2008 house prices) as the “subsidy by another name” would fuel the fire of the selected few deserving families who the government would choose to anoint with this shared equity, allowing them to speculate to accumulate!

The issue here is that the proposal seeks to provide a second mortgage secured by the government which is non interest bearing and repayable on sale of the property. So let’s examine this scenario.

Couple A on a joint income of $55,000 are interested in buying a 3 bedroom house in Auckland at $300,000 – thanks to previous government support and the kiwisaver home start incentive they have saved $20,000. Now on their income the deposit is less than the 10% and a bank would not lend due to credit history lets say anything more than 85% of the purchase price – also the mortgage on even the 85% ($255,000) would be $515 per week – far more than they could afford on a take home wage of $850. But here comes the shining white knight of our government to offer an interest free loan as a second mortgage of $130,000. Now the situation becomes very different.

Couple A now need only borrow $150,000 which of course is only 50% of the value and pay a mortgage of $300 per week. This all sounds wonderful – a perfect solution – Couple A can now start their property climbing aspirations, a shining example of a helping hand up rather than a hand out!

Now lets examine the situation 3 years down the track when one of 2 scenarios have occurred:

  • Firstly Scenario 1: Couple A have acted responsibly – maintained and even with a great bit of kiwi ingenuity and hard work enhanced their $300,000 home and have decided to sell. The property was bought in a good area and property prices have risen 7% per annum each year. They sell for $400,000 (7% inflation would means a growth to $367,000 plus the property improvements of $33,000 added by Couple A). Couple A now repay kindly their government second mortgage of $130,000 leaving them with $115,000 net of their mortgage repayment! – so in 3 years thanks to our government they have achieved an annual return over 200%.
    Now the key thing is this successful financial return has been achieved on the back of taxes paid by hard working New Zealanders. So where is the shared risk, shared reward of shared equity?
  • Now for scenario 2: Couple A are not as diligent and committed as in the first scenario, they become a little slack with mortgage repayments, unfortunately they also bought in a less well maintained area where property prices have not grown as the local factory and processing works closed. Mysteriously one day when the Baycorp people pay a visit they discover that nobody lives at the house, the copper wiring has been stripped out with anything else of value. The property would have been worth around $290,000 in good order but now looks like a tough buy at $230,000. The bank want their $148,000 mortgage back from the mortgagee sale as a first mortgage, leaving the government with the balance after fees of $76,000. Now that does not look to be such a smart investment by our government! Oh and by the way that was our collective $54,000 that was just lost, let alone the loss of interest opportunity on the original second mortgage over the 3 years.

This is an election year and the lolly scramble has started in earnest, just let’s hope that the majority of the population have the intelligence to see beyond the smart spin!

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Web statistics clearly show a very slow property market

Posted on: February 10th, 2008 | Filed in Buying / Selling a home, Real Estate Industry, Website news

The fact is that as at the end of December 2007 there were just over 60,000 properties for sale on realestate.co.nz amongst the total of 99,000 listings in total. The balance being Commercial property, Farms and Agricultural land and Businesses for Sale as well as Property for rent.

The website is subscribed to by over 1,300 real estate companies across the country and represents close to 90% of all listings by licensed real estate agents, thereby anointing the website with the title of the most comprehensive website for property in NZ and also a very critical ‘bell weather’ to the ‘lead indicators’ of the property market.

By analysing the sales statistics from REINZ and cross matching it with the listing stock on the website you quickly build a picture of the current state of inventory in the NZ market for property.

In the space of 12 months through 2007 the level of inventory rose from around 4 ½ months at the start of the year to 8 months stock at the year end, this growth was most pronounced in the second half of the year, shooting up from 5 ½ months in July.

In absolute terms the number of houses seeking buyers has risen by over 10,000 (June 50,134 to December 60,427). The figure at the end of January was slightly down at 57,525 however we will have to wait until the January statistics are released by REINZ to see if this reduction in stock was reflective of sales or withdrawals.

So what can we glean from the data as a key indicator of the state of the real estate market?

Clearly with a stock level of around 8 month worth of sales – the supply far outweighs the demand with a consequential ability for buyers to be patient and selective – allowing them not to be panicked into a buying frenzy as was the case over the past couple of years. As for sellers, the competitive effect of this amount of stock of potentially alternative options for buyers means presenting a property in the best light to attract a buyer and then ensuring that price expectations are realistic. A reality is that properties are selling – just not in the amounts that they used to so if you plan to sell, you need to be realistic to the market.

However as with any statistics caution needs to be applied as these statistics are broad based across the whole country, and just as there is no median house, so there is no marketplace for all 57,000 properties. The fact is that real estate is a local market.

Looking on a regional level, not surprisingly the analysis shows up some interesting variances:

inventory-table-feb-08-3.jpg

Immediately you are drawn to the regions of Northland and Central Otago Lakes with nearly 2 years and 1 year’s inventory respectively; both of which are areas with a active tourism impact and which have been subject to extensive development over the past few years.

At the other extreme Otago and especially Southland record the most modest growth in inventory and low actual stock levels, Southland the lowest inventory in the country at the end of the year with just 4 months. The two areas of Auckland and Waikato / BOP represent collectively 49% of all the inventory and therefore mirror naturally the national figures. Wellington which is normally considered to be a market immune to peaks and troughs certainly seems to indicate a real growth in inventory from around 3,700 in the first quarter of 2007 to end the year at just on 5,000 properties on the market.

Whilst the January sales figures due to be released this week will indicate the likely trend for 2008, it is pretty clear from all other indicators that the property market has slowed considerably, the Auckland sales reported by Barfoot & Thompson for January being some 40% down. January is traditionally one of the quietest months and an indicative figure or between 4,500 and 5,000 sales across the country for the month would seem likely. This would be a 40% decline and be the slowest January since the early 90’s.

It is proposed to update these inventory statistics on a regular basis on Unconditional – subscribe to an RSS feed to ensure you are kept informed on this and other subjects on the real estate industry.

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Open homes are the shop window of Real Estate

Posted on: February 7th, 2008 | Filed in Buying / Selling a home

Open homes have become the shop window of the real estate industry, and just as business meetings have migrated from the board room to the local cafe; the fact is you are far more likely to meet a real estate agent at an open home than at their office.

So it is therefore surprising to read in a recent industry article that a survey from the National Association of Realtors in the US shows that despite the fact that 48% of all home buyers go to open houses, when they were asked where they learned about the home they purchased, “open house” did not even show up in the responses.

Statistically speaking, open houses don’t sell homes – that is what the survey appears to say!

I suspect that this is not the case. Open homes serve a valuable purpose for all parties in the real estate transaction process.

The vendor sees an open home as a perfect showcase for the property – strongly influenced by their agent’s view of the value of open homes (more on that in a second). The establishment of a dedicated time for the open home provides a highly efficient means for the property owner to prepare their open home to look its best – clearing away clutter and adding those inviting touches of flowers and baking aromas!

Prospective buyers love open homes for a couple of reasons. Firstly web site images and glossy brochures only provide the tempter – you have to get a feel for a property not only every aspect of its look and feel but also the context of the location in the street and the neighbourhood – information which is rarely shown in any marketing material. Secondly open homes are non-threatening for prospective buyers who these days really don’t want to deal with agents until they are ready and have investigated all the options.

The real estate agents love open homes (well most do) – they provide a showcasing of their vendors property, but in some way they are a far more valuable way of establishing leads of prospective clients – after all who visits open homes in the main? – people who are looking to buy and therefore probably will be needing to sell! – so the warm and engaging greeting by the agent is genuine, they certainly want to sell that home, but they also want to sell your home!

In addition an open home provides valuable feedback from prospective buyers to the condition of the house as well as indicative price. They certainly are time consuming for the agents requiring most agents to work 7 days a week, a factor not appreciated by many who assume real estate is a weekend job, whereas in fact the weekdays are dedicated to prospecting, facilitating transactions and negotiating selling agreements together with marketing, with the weekend being the showcasing time.

The open home is and has been for many years a key part of the process of real estate not only here in NZ but in most parts of the world, with a few exceptions one of which being the UK which still manages most viewings by appointment. Despite the advent and meteoric rise of the internet there is no substitute for a good walkaround of a property to effectively “kick the tyres” – the only thing missing is taking the prospective house for a test drive – after all you wouldn’t fork out one tenth the cost of a property on a car without a thorough test drive and independent inspection.

Related articles on realestate.co.nz which may interest you:

A Guide to Open Homes

Property Inspection checklist

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Will 2008 see house prices rise or fall?

Posted on: February 2nd, 2008 | Filed in Money Matters, Real Estate Industry

This has got to be the key question being asked of real estate agents across the country this weekend as the country gets back into normal gear with the school year starting and families considering the pros and cons of finding their next home.

At this time we seem to be clearly in a buyers market, sales of property slowed significantly through the second half of 2007 and the feedback being whispered within the real estate industry is of a very quiet start to 2008. We will need to wait another 2 weeks probably until with see the REINZ statistics for January. Maybe the excuse of the prolonged summer period can rightly be blamed for slow sales – we will have to wait to see how people explain the situation.

However to look for the signs of what we should expect to see in terms of future house prices you need look no further than good factual statistics, because whilst the purchase of property is a very emotional act it is en-mass driven by the very clear principles of economics – supply and demand.

People are attracted to NZ for a better quality of lifeNew Zealand is a country that continues to attract immigrants, this is a country that people want to come to for a better quality of life. In the year to November 2007 a total of 82,600 people chose to make this country home. Now set against this is the fact that 76,000 people chose to leave the country. On the face of it this means that NZ needed to meet the housing needs of only just over 6,000 new residents. However deeper in the numbers is the fact that many of the departing kiwis are young people setting off on the great OE – this component of the outflow has little effect on the housings stock as these young people rent or live at home. However a larger proportion of the new kiwis are older with families and money looking to settle and buy property – this is the constant and growing demand side of the housing market.

If you look at the last 5 years and examine the population growth of NZ you see a very clear factor in property price increases. We are growing our population faster than we are building new homes. Today’s population is 4.256 million up over 68,000 people in a year, this growing population needs places to live (appreciated they don’t all buy). The fact is that despite the peak year of new builds in 2004 at over 32,000 the shortfall of house starts to population growth currently runs at around a shortfall of 1,500 homes per year. Now as reported this week the consents for building starts for 2007 have fallen to just 24,500 for the year – this will leave an even larger shortfall.

An ever growing demand for property fueled by immigration and a strong economy matched with a slowing new build programme supported by a very liquid credit market could potentially lead to a squeeze on prices which could well see the right property in the right area appreciate in 2008 – maybe not by 10% but certainly well ahead of the 3% inflation. Add to this the current sluggish real estate market and a glut of homes looking for buyers. All indicators that the median price of property may well continue it steady rise again this year, so it might well be a pretty attractive time to buy.

So this could yet turn out to be a very busy weekend for real estate agents. Not a story the Reserve Bank Governor wants to hear, bit unfortunately his remit does not stretch to such areas as immigration. We need to face the fact that we live; and choose to live in this global economy with all the ensuing benefits of consumerism and rising living standards, to participate is to lash ourselves to the other boats around us and rise on the incoming tide rather than anchor us to the bedrock of the past and suffer the ensuing flood-waters.

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Doing your bit for the environment as a home owner

Posted on: January 31st, 2008 | Filed in Architecture & Construction

– Planning to build a new home or undertake some renovations this year?

– Feel that pang of consciousness that you should be doing something for the environment?

– Get that blank stare from the local yard manager at the builders merchants when you start talking energy rating and environmental impact?

The fact is you are not alone – there is clearly a growing ground swell of opinion that is more open to recognising that in many aspects of our lives we need to be more responsible, from using energy efficient light bulbs to driving more economically and using recyclable containers.

When it comes to the home whilst the ideals may be there the reality is that often a lack of knowledge can leave you wondering if greater insulation is really cost effective and if double glazing is really beneficial, or if a heat pump can really give you a cozy warm glow on a winters night as it can cool your sweating brow in January.

I am pleased to report that there is help at hand – a new company Right House, started up late last year is endeavoring to be the guide and support for homeowners and all parties in the construction industry to better understand energy efficiency and enhanced living environment in the home from the perspective of not just this product or that product. Rather their approach and service is effectively to be able to undertake an audit of our plans and needs and to be able to offer advice and solutions of how the design of your project (full build or renovation) can be enhanced through this solution or another solution. Having provided advice in design solutions they intend to be able to provide you with products and installers to carry through the plans.

Now the interesting thing is that this is not a new government scheme to teach us to be more environmentally aware, this company Right House has been set up by an energy company – Meridian Energy. Now on the face of it that is strange, an energy company trying to help you save energy. The fact is the best people to offer advice and guide us into the future energy sources are energy companies so what at the outset seems odd has the most logic to it.

And if you were wondering about the costs of social responsibility in the form of energy efficiency, I saw an interesting article on their website which speaks to the general misapprehension that building green is way too expensive. The survey carried out by the World Council for Sustainable Development found that whilst the perception is that building green would be at a premium of 17% over conventional construction the real premium was just 5%. The same report also also exposed the alarming statistic that respondents put greenhouse gas emissions by buildings at 19% of world total, whereas in fact is it closer to 40%.

This clearly shows that we need to act in a responsible manner in our new builds, renovations and even DIY to ensure we are doing our bit for the environment.

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The challenge of building cost effective homes – could commercial construction offer some pointers?

Posted on: January 27th, 2008 | Filed in Architecture & Construction

Homes are or should be built to last. That is conventional wisdom and the debacle of the leaking home saga should if nothing else have taught designers, builders and legislators that a bit of out-of-the-box thinking would be a good idea to deal to an issue that has had a serious impact on so many home owners , and cost all rate payers a small fortune as local authorities suffer an avalanche of liability claims now and in the future!

One of the underlying issues though with the majority of home building in NZ these days is that everybody wants custom designed homes. We loathe the cookie cutter approach of the bland modern estates of the UK and the US. We want to have our distinct and unique home custom designed. However often the reality of this customisation is little more than minor remodeling of the interior as this is often the area that matters most to us buyers as we through this impart our own unique style and personality to our home. This customisation adds cost without really adding value. Whilst at the same time there is clearly a growing interest and appeal in energy conservation and enhanced living environments, and as ever we all want our cake and to eat it (at the lowest cost)!

So let’s for a moment stand back from the time-honoured practices of today’s building systems and look objectively at the building process. In doing so you would see that these demands are actually working in conflict with each other – to achieve cost effective construction with energy efficiency and custom design will always cost far more than modular design.

There is a potential solution which should be considered, and I know it is one that has been thought of before but is worth airing again to see if it has interest among the community of this website. Simply why not treat residential construction like commercial construction and using the analogy of the auto industry of the past – build a strong solid chassis and clad it in a custom body to suit the client.

This approach could provide for such developments as suspended ceilings and floors allowing for greater insulation as well as the opportunity to make future modification for future proofing plumbing, electrical as well as heating and ventilation. Creating this inner soft shell inside of a solid unitary outer structure would allow for simpler and safe remodelling of internal layout in the future – we are not talking about a lick of new paint but allowing for the complete re-arranged walls and services all safely done inside of a structurally sound shell.

Effectively this smart home could be built in 2 parts – a specialist primary contractor providing the structural outer shell either in masonry or modular concrete construction form. This construction type is both highly energy efficient with the thermal mass benefits of concrete as well as having advantageous health benefits. Let’s not forget that the majority of NZ homes do not have any fixed form of heating and this produces very poor environment for all. It is also faster to build in a modular form, therefore potentially saving cost.

After the completion of the primary shell the interior fit out specialist who can, within the ideal environment of a “closed-in” shell finish off to the exacting standards of the client or developer. This approach could bring scale benefits in the processing of the external structural shell as the primary costs will be more directly related to size. This would also allow homeowners to have homes of size built with a base level fit our which could more cost effectively upgraded in future.

What’s your opinion? Has this potential? It would be interesting to hear from any builders, developers, designers or contractors who may have looked at this idea before.

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