An evaluation of residential speculative developers' subcontractors perceived risks

Speculative house building is driven by market demand and has since the mid-sixties grown into a huge market and increased in dominance throughout the seventies and the eighties. In the 1990's there has been an unprecedented slump in the housing market and it is unlikely that the same level of increase witnessed for much of the 1970s and 1980s will return in the foreseeable future. Sub-contracting is one strategic action which speculative developers employ to cope with long-term demand uncertainty. It allows the developers, if they so choose, to avoid the employment of a stable work force and investments in fixed resources under conditions of fluctuating demand for houses. The paper presents a research into the speculative housing developers' pertinent risks as a result of the employment of subcontractors. It discusses the unique nature of the speculative housing market and the risks and uncertainties faced by these speculative developers. Details are also given of the important roles that sub-contractors continue to play in the speculative housing market sector. The overall analysis revealed that the risks are higher at the start of the contract but through identification and control can be managed and turned into critical success factors during the duration of the contract.