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Specialisation In Melbourne Construction Market

One of the more interesting developments in the Melbourne property market of late has been the rise of the specialist builder. Previously, customers looking for home builders in Melbourne have had relatively few features to differentiate between their options. Now, however, builders are increasingly offering specialist or niche services. For instance, a sloping block builder may compete on the basis of their ability to better serve customers with sloping blocks. A heritage home builder possesses a distinct marketing advantage among customers looking to build their prestige new houses in Melbourne in a manner that remains respectful to the architectural and social history of the areas in which their houses are built. This process of increasing differentiation among house builders in Melbourne is good news for prospective buyers, increasing consumer choice and driving down prices as builders are able to utilise specialist knowledge to limit prices.
The increasing popularity of the knock down rebuild, perhaps spurred on by TV home renovation shows, has also led to an increased number of specialist home builders in Melbourne. Knock down rebuild construction differs in several important ways from greenfield development, and so builders with the necessary expertise to effectively carry out a knock down rebuild are best placed to benefit from the increased popularity of the knock down rebuild. Similarly, the diverse local conditions of new greenfield developments on the urban fringe of Melbourne mean that the sloping block builder is likely to be able to offer a better quality of service in many cases to a customer who wish to construct their house on a sloping block. Additional expert knowledge and experience combine to create a superior experience for customers and a distinct market advantage for prestige designer homes which possess those attributes.
Increasing attempts at non-price differentiation through specialisation in the building industry are consistent with what would be expected in a market with a monopolistic competition structure. In these types of markets, with a high number of competitors relative to the number of consumers, vigorous competition restrains prices. The scope available for competitors to innovate and specialise in order to gain an advantage in the marketplace does allow for certain participants in the market – for instance, the sloping block builder or heritage home builder discussed earlier in this article – to gain an advantage over their competitors through non-price differentiation, such as a good reputation or a better class of service. The ability for suppliers in monopolistic competition markets to differentiate themselves in this manner means that monopolistic competition may actually be the best market structure for consumers in many industries. In the context of perfect competition, perfectly elastic demand means that suppliers are unable to make sufficient profits to support innovation. Conversely, while oligopolies and monopolies allow for even greater innovation than monopolistic competition, lack of competition drives up prices, potentially to a level higher than consumers would prefer to pay.