Property buyers proactively scrutinising delivery partners during sales presentations
The leading property site realestate.com.au recently featured an article about consumer demand for assurance regarding builder and developer trustworthiness. It received over 1,000 views in the first week and sent hundreds of property buyers to the iCIRT website and Register.
Article extract:
❝ Planning a build or renovation? The truth is the biggest risk isn’t in the colour scheme, floorplan or fittings, it’s in who you choose to work with. So how do you know if a builder or developer is genuinely trustworthy? It starts with transparency, and that’s where iCIRT comes in.This rating system is designed to help Australians make informed decisions with confidence, eliminating much of the uncertainty and guesswork that traditionally comes with choosing a builder. Among those who know about iCIRT, more than four in five (81%) say they have a positive view of the industry ❞. Read full REA article here.
Buyers are worried about building defects, so they are focused on picking reputable builders and developers rather than just aesthetics. David Milton, Managing Director of CBRE Residential Projects notes "who’s delivering it?” is now a critical question, “it’s not just finishes and design. Reputation is now more important than ever in this market”,
Independent YouGov research shows that nearly 9 out of 10 respondents think trust and confidence in builders to be crucial. Over 3 in 4 of respondents are willing to pay a premium of over 3% for independent due diligence and ratings.
High renewal rates among iCIRT rated businesses
More than 8 out of 10 businesses that have undergone an iCIRT rating choose to renew. This shows the long-term value obtained through holding a trusted, independent rating.
Of the smaller number of businesses that didn’t renew, many either have a current rating within their broader operating group. Or they failed to get a trustworthy rating outcome in their next review.
Significant market penetration
More than 1 in 3 medium and large residential builders and developers in NSW are using iCIRT. Collectively, they represent more than two-thirds of the state's residential building market by value.
Industry leaders like Managing Director of Helm, Mark Monk, advocate for iCIRT. Monk states in this video: “For me, iCIRT is incredibly important for our industry. It's a tool that allows us as a business to differentiate ourselves. It shows that our purchasers can trust us, they believe in us and that we've been rated by an independent agency. That at the end of the day it has delved into every aspect of our company. For our financials to be verified, the credibility of our team, the procedures, systems, all of the things that go into making a good company, a great company.”
Having an iCIRT rating may help businesses protect their pricing and avoid competing solely on cost. For a business with a $2M annual turnover, even a 1% pricing advantage can yield a 250% return on the rating cost, significantly boosting profitability.
Lenders increasingly leverage rating tools for risk assessment
A survey by Stamford Capital shows that iCIRT ratings are important to lenders. Nearly half of NSW funders now already use or are incorporating iCIRT ratings into their due diligence processes.
At an AICM webinar, Domenic Lo Surdo, President of the Commercial & Asset Finance Brokers Association of Australia (CAFBA) and Group Executive Chairman of Stamford Capital, said lenders have enhanced their due diligence. This includes a stronger focus on operational governance, counterparties, and key trading partners.
“Whilst lenders have their own processes to underwrite risk, they’re not ignorant to better ways of assessing risk and understanding risk. And I think one of the things which rating tools are able to achieve is that sort of deeper understanding of risk as it pertains to counterparties, whether it be the developer or the contractor. Lenders are using rating tools increasingly, and I expect that trend to continue”, stated Lo Surdo.
He further noted, “Financiers are now looking beyond the developer and head contractor to the subcontractor level. And they’re wanting to understand who the subcontractors are and what their capabilities are.”
The survey indicates that 82% of lender respondents have intensified their due diligence in response to rising construction insolvencies: “Lenders are increasingly turning down deals if builder financials don’t stand up to scrutiny - especially in NSW where iCIRT ratings provide greater transparency of builder and developer capabilities, integrity and reputation.”
The survey also found that 43% have rejected loan applications with no ratings or poor iCIRT ratings.
Builders recognise the value of independent ratings
A Master Builders Association (MBA) pulse check shows the growing recognition and importance of ratings. Nearly all the respondents (95%) said ratings can boost consumer confidence, and 45% said they would be 'very helpful' or 'extremely helpful'. This aligns with the 73% of respondents who identified trust as 'very important' or 'extremely important' in the current climate.
Notably, most respondents (94%) said ratings should be provided by an independent body. This reinforces the value proposition of iCIRT. The pulse check also found that over half of the respondents had customers who were willing to pay more for a 'trustworthy' builder, directly highlighting a tangible benefit for iCIRT rated businesses.
The top six benefits identified by respondents regarding independent ratings are all key outcomes associated with achieving an iCIRT rating:
- Increased trust with customers
- Improved reputation
- Increased confidence with insurers
- Improved confidence with regulators
- Increased confidence across funders
- Strengthened competitive advantage.