The order books of contractors and construction companies are less full than a few years ago. Can you do interesting things if you want to renovate now? ‘There may be bargains to be had, but a warning is appropriate.’
The construction sector is in the corner where the blows are falling. According to an analysis of The time After the new construction earlier, the renovation sector is now also finding it more difficult. 46 percent of companies that are renovating assume that there will be less work in 2024, according to the latest economic survey by the construction federation Embuild.
“Our construction barometer, a survey that we conduct among our members every quarter, clearly shows that order books are becoming less thick,” says Jean-Pierre Waeytens, managing director of the Bouwunie. “For the second quarter in a row, construction companies have also had to lay off employees.” Finally, fewer people are taking out mortgage loans and fewer building permits are being issued.
What is that about?
The increased interest rates for loans for the purchase of a home or renovation play a major role. “If the interest rate rises by 1 percentage point, the amount someone can borrow falls by about 10 percent,” says Wouter Thierie, real estate economist for ING. “At the beginning of 2022, the interest rate for a mortgage loan was still 1.4 percent. Now it is 3.7 percent. This means that people with the same money can now borrow 20 percent less. Moreover, we expect interest rates to rise slightly in the coming months before stabilizing.”
The pandemic increased the price of many building materials. Some materials became a little cheaper this year. Although it is more correct to speak of price stabilization – at a higher level than before corona. “Anyone who hopes that prices will fall even further would better believe in Sinterklaas,” says Waeytens. “That won’t happen immediately.”
What does that mean for those who want to renovate?
Renovations have simply become more expensive. In addition to higher interest rates on loans and more expensive building materials, workers’ wages have also risen. The Bouwunie has noticed a trend towards more compact (re)building as a result. “The entrance hall, the stairwell or technical room: people try to make them smaller in order to continue to build or renovate them for the same money,” says Waeytens.
“All together it has indeed become more expensive and more difficult to build or renovate,” says Thierie. “Since the start of the pandemic, the average cost of building or renovating a home has increased by 24 percent.” However, this should not deter private individuals from investing in renovation, Waeytens believes. “Know, for example, that wages will rise again in January. That will not be 11 percent again, but it will increase.”
Is there really no good news to be had anywhere?
Yes, without expecting miracles, contractors may lose some of their margins due to cheaper building materials. In addition, waiting times at construction companies are also becoming shorter. Although it might be better to be patient for a while. “As architects, we are at the beginning of the chain and notice that demand is decreasing,” says architect and expert Vincent Van Den Broecke (Blanco architects). “In Leuven and around Brussels, where I work, contractors are still living off the enormous boost that the renovation market received from corona. Perhaps that will decrease next year.”
There may be opportunities there for private individuals. “We learn from the European Commission surveys that many contractors say the drop in work is their biggest concern,” says Thierie. “Perhaps this means they are willing to negotiate more.”
What should you pay attention to as a regular private individual?
First and foremost, that old saying applies: what sounds too good to be true, probably is. “For some construction companies it is sink or sink,” says Van Den Broecke. “The skilled contractors will continue to exist, unprofessional companies will disappear. As a result, there may be bargains to be had for private individuals. Although a warning is in order. Companies that dip significantly below the market price may save on other things such as quality, service and reliability. So be on your guard.”
The recently published ‘blacklist’ for entrepreneurs from the Justice Department can be of help. “This way they can check the financial condition of a contractor,” says developer Lorenzo Van Tornhaut. “Bankruptcies are also increasing among contractors.”
It is also the reason why it is not smart to pay high advances. Contractors often ask this to purchase materials. “Working without an advance payment is not easy,” says Van Den Broecke. “But never pay a 50 percent deposit.” So always ask why an advance is needed and what materials the contractor purchases for it, for example.
For those who do not work with an architect and enter the market themselves, it is important to receive quotes as transparently as possible, with a price attached to every work and every material. Anyone who allows contractors to give a fixed price does not have a leg to stand on afterwards to settle additional or reduced costs. “Know what you are asking a price for,” says Van Den Broecke. “For what quantities, what materials, what surfaces, etc. Anyone who enters the market themselves could consider asking an architect to sit together for an hour to compare quotes.”