Saturday, February 27, 2010
In the last couple of days our contractor has started to construct the spiral staircase, our stairway to heaven, that starts from just outside the lanai and runs up to the viewing terrace above. First a very solid block of concrete was laid. Then a mounting post was added to which an inner steel tube was then bolted. An outer steel tube sleeve was then cut into small sections and a steel step was then welded and attached to each section, dropped into position on the inner tube and rotated to create the required spiral.
Facia stone is now being added to the lower sections of some parts of the exterior wall although, what with the mixture of acrylic coating preparation to seal some walls and test coatings of the final colour to others, the house is a bit of a Christmas tree colourwise at the moment.
As with so many other components of our house these things are built from the raw materials on site rather than purchased ready-fabricated. The same goes for our kitchen, which is being created by cabinet makers from scratch, not purchased as off-the-shelf flatpacks a la mfi. So in a real sense most of our new home is custom designed and built.
The UK pound is now down to 70 pesos (not lifted by the revision upwards in UK growth statitistics announced today), although, except among the expat community, there seems little awareness here of the strength of the Philippines peso against the traditional reserve currencies or the damage that it is doing or will do to sales. A lot of interest has been expressed in our house, who we are having construct it etc, however, I detect a growing resistance among expats to constructing homes in the Philippines and decisions postponed or cancelled due to the appreciation of the peso. This is not in any way a vote against contractors like Northcon but the natural consequence of the peso’s appreciation.
We too have decisions to make regarding the additional sub-projects (driveway, backfill etc) but the strength of the peso creates a dilema for us. To make matters worse, whereas last year we would have accepted bids from our contractor after a little re-negotiation, now we find they are more reluctant to shift on price, some revised bids are actually higher than initial bids, and some bids absurdly high, suggesting they don’t even want the work unless we are prepared to pay a silly price. As a result we are awarding projects to local contractors rather than Northcon as we can exercise more control over the cost of materials and labour and bring projects through at a price that is affordable given the strength of the peso.
The accumulation of cancellations and postponements is not good news for building contractors here, so while there may be work for some at the moment, there is likely to be far less going forward unless they review their margins.
All businesses, building contractors included, have fixed costs they must cover whatever, so once the variable costs of a build have been covered i.e. the materials and labour, every peso they earn makes a contribution towards those fixed costs. This is what is often referred to as marginal costing. It provides a template for companies when bidding. No work means no contribution to those fixed costs. Trim the margins, reduce the contingencies, and the bids are more likely to be accepted by expats under pressure due to the appreciation of the peso.
A structural analysis is being added to our fencing permit application by Gina’s uncle, who is a senior engineer at City Hall, and we hope it will then receive approval so our fencing contractor can begin construction. We met with the fencing contractor today to discuss ways of limiting the cost of the design above the retaining concrete/backfill level while at the same time maintaining security features. We hope we will not have to wait too much longer for the fencing permit to be released as the original permit application was submitted on 1st February.