SIPs Construction - A love, hate relationship

New legislation requiring Australian Homes to be energy efficient, coupled with significant shortage of skilled labourers has resulted in new love of Structured Insulated Panels (SIPs). Although ‘hate' is probably too strong a word, they are not exactly loved by the banks. Before setting your heart on a SIPS construction, it is worthwhile to understand the love hate relationship and ultimately weather they are the perfect partner for you.

Love  

Rather than stepping into the shoes of an architect, I will keep on my financial heels and describe the benefits of SIPs from a financial perspective.

Time is money – as panels on manufactured off site, construction on site is significantly faster. This makes a difference if you rent elsewhere during the build or are covering two mortgages.

People are your greater expense – SIPs construction requires, less labour, a lower range of trades and less site hours. As labour accounts for about 50% of your conventional build costs, this really makes a difference to your bottom line.

Less hidden costs - such as scaffold and equipment hire and rubbish removal.

Not Love

Banks do not love SIPs constructions. They perceive it to be higher risk. This means that either they won’t loan you the capital at all or they will loan you some capital, but it will be about half of what you will get with a conventional build.

Bank perception of higher risk is based on the following:

Lack of Familiarity: Banks and lenders are generally more familiar with traditional stick-built construction methods. SIPs construction methods are relatively newer and less common in some areas. This lack of familiarity can make lenders more cautious, as they may not fully understand the process or the potential risks involved.

Quality Control Concerns: While SIPs homes are built in controlled factory environments, lenders may still have concerns about the quality of construction. They might worry that factory-built components could be subject to defects or that on-site assembly may not meet the same quality standards as traditional construction.

Appraisal Challenges: Appraising the value of a SIPs home during construction can be more complex compared to traditional homes. Finding comparable properties for appraisal purposes can be challenging, which can affect the lender's assessment of the home's value and the loan amount.

Collateral Concerns: During construction, the SIPs home may not yet be considered habitable or fully functional, which can raise concerns about its collateral value. Banks want to ensure that the property being financed will retain or increase in value as construction progresses.

What does this mean for you?

It is important to remember that banks are slow-moving conservative creatures. While frustrating at times, it also provides a large amount of security. No one wants another Global Financial Crisis. Rather than raging against the machine, as an individual, you have far more to gain in working with the system than against it.

Before you fall in love with a SIPs build, get in touch for a free consultation to see whether it is actually feasible.

 Marisa Hoffenberg

m:0416538227, marisa@sustainablehomeloans.com.au