Why Builders Should Partner with iCIRT Rated Professionals
As our industry works to improve confidence in construction, partnering with the right professionals is more critical than ever for developers. iCIRT rated developers and builders now represent over half of the residential market by value, putting those whose entire build team is iCIRT rated in a unique position of being able to showcase their trustworthy credentials.
Maximise commercial benefits
For iCIRT rated developers seeking to attract buyers to their projects, partnering with rated builders offers a strong advantage. Promoting the involvement of iCIRT rated partners signals to buyers that the project is backed by reliable, trustworthy professionals - an assurance that can drive interest and boost confidence.
Partnering with iCIRT rated professionals meets consumer expectations for quality and transparency, while also attracting reputable partners. While the iCIRT assessment appraises individual businesses (single legal entity), the rating outcome can be impacted by the quality of their contractors.
“In tough times, an iCIRT rating gives confidence to all stakeholders in the value chain”, says Tim Spencer, Executive General Manager at the property developer and investor firm Mulpha Australia Group. From suppliers to builders, Spencer believes ratings are driving tangible improvements in confidence.
Drive sales and buyer confidence
A recent Equifax consumer survey revealed that 88% of Australians planning to buy a home or investment property in the next five years will likely require independent due diligence and ratings on developers, contractors or builders. Nine in ten Australians surveyed agree that trust in construction professionals is essential, with two-thirds strongly agreeing.
This chart highlights the significant proportion of Australian homebuyers who prioritise independent verification of builders and developers, underscoring the importance of iCIRT ratings.
The independent rating system, iCIRT, was introduced alongside other market mechanisms to build trust in the market during a time of declining confidence. The survey shows that only 42% of those who intend to buy, build or renovate a property have a positive view of the construction industry. However, this jumps to 81% among those familiar with iCIRT, demonstrating the value of independent ratings to shift perceptions.
The construction sector continues to experience high insolvency rates, reaching their highest levels in the first half of the year since Covid. Despite slower growth in the third quarter, construction insolvencies were still 14% higher than the same period last year, while the 12-month trend through October 2024 shows a 29% rise in insolvencies compared to the previous year.
This fuels concerns about financial stability among property buyers, with 8 in 10 Australians surveyed expressing concern about the risk of insolvency. iCIRT can mitigate this risk by providing early warnings of financial distress – flagging over 90% of construction insolvencies at least a year or more in advance.
Give assurance to regulators, funders and insurers
Just as partnering with iCIRT rated professionals helps developers avoid working with companies that may jeopardise projects due to financial instability or poor performance, it also signals credibility to funders, investors and regulators.
A favourable rating indicates financial viability, robust partnerships and strong governance, helping developers attract funding, navigate regulatory requirements, and secure better insurance terms. It also gives developers a clear view of their business strengths and weaknesses, allowing potential issues to be addressed proactively.
“An independent, regulated and rigorous review of a business is always welcome”, says Divya Mehta, Chief Executive Officer of Decode Construction. “If you want to sustain in the industry in the long haul, you want these things as tools to keep your business honest. So it's been a good process for us to go through twice in a row. And the second time we came out with a better result. So what better than that for the business?”
More than a third of funders now use iCIRT ratings in their decision-making, according to Stamford Capital’s 2024 Real Estate Debt Capital Markets survey. An additional 19% plan to adopt this approach within the next six months from April 2024, while 43% have already rejected loan applications with no ratings or poor ratings.
This chart demonstrates the growing prominence of iCIRT ratings within the financial sector, indicating that developers possessing favourable ratings have a distinct advantage in securing funding.
As regulators increasingly turn to ratings to target higher-risk players, developers with strong trustworthy credentials can operate with greater freedom.
Demonstrating trustworthiness as a rated player will likely unlock access to lower strata bond levels, better financing rates and terms, and reduced insurance premiums - positively impacting a developer’s bottom line.
Ready to learn more about the Independent Construction Industry Rating Tool, iCIRT by Equifax? Reach out to the iCIRT team.