However, everything we read and hear right now suggests that building can be a nightmare and that builders are unable to give accurate tenders given a whole load of factors from the war on Ukraine to other supply issues, price inflation, labour shortages and all that chaos.
Hello Anne and Michael and thank you for your question. It seems like you are jumping from the frying pan into the fire!
It is certainly a complex issue and I have yet to meet someone who has a definitive view on how this will all play out. To help answer your question, I feel we should look back a little at the source of these inflationary issues before we gaze into the crystal ball for the future.
Before Covid (remember that?) we experienced a very long (almost zero) inflationary period when labour and material prices increased, but unless it was over a sustained period of time, it didn't have a huge impact on your project cost. In most cases, it would make little or no difference to the cost of your project throughout its duration.
Then, in 2020, we had the first Covid lockdown (which lasted about six months) followed eventually by the reopening of the economy and construction sector. There was a sudden burst of energy where we began to build houses, commercial buildings, factories and infrastructure once again. There was not any significant inflation or lack of materials at the beginning of this reopening, but why was that?
From what I have learned, if you remember way back then, we had been making provisions for the chaos Brexit might bring. As a result, we had significant stockpiles of most materials in place to smooth out the inevitable supply chain friction.
In truth, Brexit was dwarfed by Covid, but these stockpiles facilitated a reasonably smooth exit from the first lockdown and let's face it, nobody really noticed or spoke of any difficulties.
Fast forward to the following series of lockdowns and reopenings, we had no more stockpiles so when factories, transport and warehousing was mothballed, the real problems started. I remember getting a phone call from a manager of a building supplier who told me that there would be very significant delays and material price hikes ahead for even the most basic of building materials.
We experienced this issue for some time but like most issues, the market reacts and gets to grips with the issue. Then, about this time last year, I spoke to the same building supplier manager, who told me that he expected things to start levelling and likely improve as 2022 wore on. Cue the beginning of the war in Ukraine a month later.
Now, all bets are off. We have seamlessly transitioned from Brexit stockpiles to Covid related supply chain issues to an energy crisis with Russia controlling much of the world's gas, who knew?
All of a sudden, while supply timelines were reasonable, prices soured again, particularly for materials whose productions are energy intensive.
So, now it's that time of year again. I have been getting soundings from said building supplier company that they are cautiously optimistic.
Some elements, for example, rough timber and steel (which were some of the first materials to rise) have in fact dropped a little, many elements are more or less level, and there are a few elements which are still rising, particularly plastering & quarried products (concrete blocks, aggregates, cement).
So, has the market absorbed the full ramifications of the war in Ukraine? Maybe to date but who knows what way this war may twist and turn this year. We all hope it will come to an end soon but no one knows.
Most builders are not taking inflation risk as they cannot measure it so the consumer (you) is having to carry it. Will prices come back down? My sense is that when there are significant reductions in input costs, these will be passed on as there will be pressure on the construction industry to do so given the fact that interest rates are rising at present.
When and by how much will things improve, I don't know, but I am certainly looking ahead with cautious optimism this year, that is unless something new arrives on the horizon. My best advice would be to keep an eye on the Six O'Clock News.
- Kieran McCarthy is a Building Engineer with KMC Homes bespoke home builder, serving Cork and Limerick. He is also co-presenter of the RTÉ property show Cheap Irish Homes.
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