New builds

PHOTO: Lucy McPherson says the the cost of her first home is going up and resulting in sleepless nights. Photo: Supplied

The rapid rise in the price of materials such as bricks, timber and steel, of up to 50 percent in the past year, is pressuring builders to invoke escalation clauses within so-called “fixed price” contracts.

A lawyer warns there is no such thing as a fixed-price contract, and buyers need to beware.

Master Builders is warning companies not to remove clauses in contracts that allow them to raise prices even after signing a deal.

Lucy McPherson, 25, and her partner Ben Butterick signed up in July for a $545,000 build yet to begin in Selwyn near Christchurch.

They thought by going rural they had got a good deal on a four-bedroom house-and-land package.

But already the price has risen by $7000 – and the sleepless nights have kicked in.

“You just don’t know what to do,” McPherson, who works in marketing, said.

House builders

House builders deterred from offering fixed prices

If what they end up paying breaches a cap of $550,000, they will not only have to pay the extra but will also lose their HomeStart grant.

“I just can’t imagine having to finish your first home, and then turn around and pay back not only extra costs that you didn’t know were going to pop up, but also that HomeStart grant which is such a big help to first-time buyers like ourselves,” she said.

Their bank had pre-approved up to $550,000 – but was “strongly, strongly” advising them not to go ahead.

“They gave us the very stern warning that they have seen many cases like this, that have spiralled out of control”, cases where cost over-runs had hit $60,000-plus, McPherson said.

@propertynoise

#happyathome #newzealand #allblacks #rugbyunion #rugbybricks #viral #nzrugby #rugby #lockdown #lockdownlife #lockdownnz

♬ original sound – Property Noise Group

A mortgage broker told RNZ about two similar-sized over-runs she had seen recently in Auckland.

“If someone came up to me today and said, oh, I’m a first-time buyer, should I build new?’ I’d say, ‘absolutely not, don’t even bother’,” McPherson said.

“You’ll have your head in the ground for months and months and months dealing with all the … craziness at the moment.”

READ MORE VIA RNZ

MOST POPULAR