Benefits of Using Professional Services in Property Development
|By Development Finance Partners / Matthew Royal|
Property development is not for the faint-hearted. While it can be a lucrative and exciting venture, especially for owner builders looking to step up to larger projects, it is also one that comes with greater risks attached than building a private home.
Costs can quickly blow out, and the project drag on for too long, if the risks involved and the project itself are not well managed.
As well as requiring drive and enthusiasm, successful property development needs level-headedness, financial conservatism, foresight, and excellent risk-management in order to minimise the chance of major pitfalls. Using professional services, such as quantity surveyors and / or project managers, can help lessen the chances of things going wrong, and protect the interests of all parties involved.
Quantity surveyors are the financial advisors and cost managers of property development. They are involved in estimating and monitoring the construction costs throughout the life of the project, from conception right through to the building phase.
The aim of the quantity surveyor is to find the most cost-effective way of completing the job and keeping costs within budget. A good quantity surveyor has expert knowledge of construction methods and costing, and makes use of various costing techniques such as planning, estimating, and analysis throughout the project.
Project managers are involved in the practical side of managing and organising the project. They manage resources to bring about the completion of the project on time and within budgetary constraints. Project managers also manage variations, represent their clients, and may be involved in resolving or preventing disputes between interested parties.
Why use property advisory services?
Most people are probably aware that the property market is not predictable, and runs in cycles. There are quiet times and boom times, with demand and supply being determined by various economic and social drivers – such as changing interest rates, or new migration into a particular region. There are also other external factors that can have an effect on the costs of a project, and these all need to be factored in when doing the initial costing and budget.
Factors to be taken into account for a building project include:
- Interest rate changes – low interest rates can lead to developers over-borrowing and paying for it later. Changes in interest rates can occur at any time, and this should be allowed for when seeking funding.
- Economic cyclical upturns / downturns – which affect property values.
- Legislation – such as taxation and planning laws that can change over time.
- Council delays – the developer might have a deadline for the project, but council decisions may not always match with it!
- Construction price increases – these may occur due to a demand for higher wages for labourers, or material shortages and higher prices.
- Disputes – if conflicts are not resolved, it may lead to needing to employ a new building team, which is likely to push up costs. This is where having good communication and documentation becomes paramount.
- Timing of the project – ideally a development should be done during a quiet period and then marketed in times of increased demand.
Wisdom is required!
So it’s clear that property development requires some real wisdom. While you might have successfully built your own home, a large property development project means an increased exposure to the associated risks. Utilising professional quantity surveyors and project managers who have real experience of the industry can help you to better manage risk, and result in a successful project.
Could your next project benefit from some expert development finance? Get in touch.
For expert advice:
Level 3, 31 Alfred St
Sydney NSW 2000
P / 02 8916 6246
Level 30/35 Collins Street,
Melbourne VIC 3000
P/ 03 8692 0082
Level 18, 175 Eagle Street
Brisbane QLD 4001
P / 07 3041 4136
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