Anyone involved in building projects this year will have experienced the challenges of longer lead time for materials and increased costs.
Over the last few months you would have seen headlines like the below:
“Construction Materials Shortage Sees Materials Prices Rise 14% in a Year”
“Shortages: A perfect storm of cost burdens”
So where do things stand with it now? And what have you been noticing?
In one of our catch up calls this week I thought it might be helpful to share what Chris is experiencing on the front line as he project manages the creation of 2 flats above our tenanted shop.
The picture attached shows dormer windows being created (thankfully on a clear day 😊) in what will be a large 1 bed flat.
Here are some summary points from Chris:
*Over the past 2 weeks we have seen building materials start to become readily more available and stock levels the merchants have been starting to get back to a more normal level.
*In the last year timber and insulation has increased by around 40-50%
*In a mid to large sized refurb or conversion project materials will roughly account for about 40-50% of the cost while labour will make up the other portion. So, by virtue of the fact that building materials have increased by 20-60%, it means that even if labour remained the same, we need to budget for around a 25% overall increase for our projects compared to a year ago.
*Plasterers have increased their rates slightly, at least in the central belt of Scotland – so when we were used to paying £9-10/sqm for plastering we are now being charged £11-12/sqm. That’s about a 20% increase, and we don’t reckon plasterers are making any more margin, rather it’s to account for their materials costs increases.
*Some main contractors are now starting to charge for tenders, however we both think this is actually a good idea and will lead to everyone in the process taking it more seriously and being more professional.
Why Has There Been Shortage of Building Materials?
The construction materials shortage can in part be traced back to increased building and home improvement activity in 2020, particularly during the first lockdown.
The lockdown led to a slowdown in the production of materials from some factories in the EU, and supply chains have remained stretched ever since.
Combined with this, construction output reached a 24-year high in June, the fastest rise in construction activity since 1997, as reported in June from IHS Markit and the Chartered Institute of Procurement & Supply (CIPS). But demand is not being met by supply, and suppliers’ delivery times have lengthened amid severe shortages of construction products and materials.
Some additional reasons include:
Lack of lorry drivers – All regions report hauliers/HGV/LGV drivers are in short supply and very difficult to recruit, which is contributing to longer delivery times particularly away from major transport routes and urban areas.
Supply of raw materials – This is stemming from a combination of increased global demand, the slowdown and in some instances, factory closures, outside the UK.
Brexit related – The Timber Trade Federation (TTF) said in May that Brexit-related complications have squeezed UK timber stocks, as 80% of the softwood used in building comes from Europe, and 90% of the softwood used for new build homes comes from the continent.
What can you do about it?
Plan as far as you can in advance to ensure you aren’t caught out by shortages or sudden price rises.
When doing your due diligence and analysis in your spreadsheets, be realistic and make sure you are happy with how the property stacks up with a little higher budget on the refurb.
What observations on the building materials challenges can you share from your current projects?