Today we will cover a few important topics, we will discuss the dramatic effects of the major shortage of both available contractors and skilled construction workers and we will talk about the effects that multi-unit investors have on the market.
Especially in Pattaya it is becoming clear that there is a shortage of skilled construction workers at the moment. Let us assume that I am correct, then what will happen with all the new projects that are due to start construction in the immediate future? What will happen when the government starts its planned mega projects that include a high-speed rail system from Bangkok to Pattaya? These mega projects may need 30.000 – 40.000 workers or even more.
Both labour shortage and multi-unit investors are important factors that have a dramatic influence on the property market. The number of new projects about to start construction is extremely high, that means we are looking at a construction sector that will be facing severe problems in the near future.
Demand an increase in salary when you know there is a shortage of candidates with the necessary skills and experience to meet the demand. If the boss needs you more than ever it is time to take advantage of the situation. Supply and demand will determine the price for services.
“Demand an increase in salary when you know there is a shortage of candidates with the necessary skills and experience to meet the demand”
The workers can demand an increase in salary and they will. The developer will end up paying the bill, he may already have sold all the units in his projects long before construction starts so he might not be able to pass the bill onto the customers.
In other words, either he will be selling at a loss or he will not be able to deliver the quality promised. Shortage of labour does not only mean that the cost of building will be greater than expected, it also means that the projects most likely will be delayed. If the project is not completed on time the developer may pay a penalty.
“Shortage of labour does not only mean that the cost of building will be greater than expected, it also means that the projects most likely will be delayed”
We can all agree that labour shortage is a very serious problem for all parties involved.
As promised we will also talk a little about the effects that multi-unit investors have on the market. There are some investors that buy a very large amount of units in various projects. These investors will demand a very large discount so basically the developer will be selling with little or no profit.
Why would a developer agree to sell a large number of units without making money? It sounds crazy but the answer is simple. Due to the high number of projects on the market the investor knows that the developer may be in trouble without his ‘help’. Times are tough and investor takes advantage of that. Basically the investor can keep some projects going with his purchases as he will make the sales numbers look good.
Most developers need good sales numbers before they can get the project financed, that is why they are often forced to make deals with the devil. In short, developers project may be kept alive but he will be paying a price, he will be selling at a cost that basically only covers his expenses.
Both labour shortage and the fact that there is a need for multi-unit investors mean that the developer will be making less profit.
Published 19 December 2013
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