Construction Industry Beware of Falling Prices
Dear Sir,
There is a misconception amongst the general population that construction prices in Cayman are falling. Falling prices are like falling hair there is bound to be some thinning that follows somewhere.
All contractors, large and small, are feeling the pinch. September 11 taught us all a new reality. Our sense of safety was shattered, our innocence lost by the realisation that emotional and financial chaos can be rendered by someone halfway across the world using everyday methods of transportation as weapons. That technology and might can be overcome by fanaticism and fundamentalism. That buildings become martyrs and the sense of loss we feel when skylines are reduced to rubble. In the early months following this tragedy everyone held their breath waiting for Osama to be captured or killed. This has not yet happened and further compounded by Anthrax scares the population has yet to exhale.
All of this causes us to protect what we have and only a few optimistic souls, perhaps taking advantage of low interest rates, have re-entered the market place. This creates the impression that a "deal" can be struck from the many builders reeling from this aftermath. But ask yourself the question, "What has really gone down in price?" Surely not insurance, phone, electricity, gas, shipping, duties, salaries, health insurance premiums or pensions, so what is happening?
In a nutshell, profit margins are being slashed to the bone. For the larger companies that are financially secure, it is possible to do this temporarily but even they will soon feel the pinch. Smaller companies are quoting low prices just to be able to work. The end result is either the suppliers, their labour or sub-contractors do not get paid or your house does not get finished. Sound familiar? The Cayman Contractors Association gets perhaps 40 to 50 calls per year from homeowners who ask if any recourse can be sought the answer is no. Homeowners are not the only ones to blame.
Bankers and architects routinely approve loans and/or contract sums that are unrealistic. It appears that human nature dictate that we assume the higher price is greed, and the lower price to be the fair and equitable one, but this is not the case. Contractors routinely bid against 5 to 10 other contractors for the same job, so where would it benefit anyone to spend thousands of dollars in time and still bid high? We would never get any work. We have to be competitive or risk obsolescence.
But how level is the playing field? Here again the answer is negative. Without a Builders Licensing Law there are no regulations or parameters to become a contractor, unlike the Cayman Contractors Association which has strict entry and grading requirements based on the number of years in business, financial strength, infrastructure and experience. All Cayman Contractors Association members have to provide proof of liability and Workmen's Compensation Insurance and health and pension providers. Without them, a hapless homeowner is, one day, going to experience great financial loss when someone gets hurt on their job and the contractor has no insurance.
We must also cease pricing homes by the square foot as a comparative unit. A Hyundai and Mercedes are the same square footage, but who would argue the engineering and inherent goodness and workmanship that goes into each is evident both immediately and over the long haul? With price-cutting comes quality concerns are you really getting what you paid for?
Advertisements in the newspaper add to the confusion. A lot of these companies are building a low-income model that most people in Cayman do not seem to want. In Cayman, the affluence has created a marketplace that supplants yesterday's luxuries as today's necessities. We simply want more and expect to pay less. The two do not go together and we are seeing more and more defaults as the months roll by.
How do you go about selecting a contractor? Do your research by asking others and by calling the Cayman Contractors Association. At least, you know their members have been graded by their peers and are what they say they are. Most people spend more time picking a hairdresser than they do a contractor, often with dire results. Not all builders are equal and the difference between a builder and a General Contractor is both fiduciary and having singular source of responsibility.
We caution the Public to be cognizant of the dangers that lurk out there by using a builder lacking the necessary business skills to manage your money. You wouldn't, after all, hire a nurse to perform heart surgery, would you?
Cayman Contractors Association