Rising materials costs causing building prices to soar
A crisis is building in Ireland’s construction sector – a combination of soaring materials costs, scarcity of product and a shortage of manpower.
In the two years between June 2019 and June 2021, wood, steel and insulation have rocketed in cost – as have pipes, electric cable – in fact every material necessary in construction.
Add to this the supply chain issues resulting from the HGV driver shortage affecting many countries worldwide, and the recent rapid surge in fuel prices, and it becomes clear that there is not going to be a reversal of the escalation any time soon.
“I don’t understand why this is not headlines every day,” says one builder locally, summing up pithily how serious the crisis is.
In just 12 months, the cost of building a house has risen by around a third, according to consultant engineer John Madden of John Madden and Associates.
“Over the last year – and particularly the last six to eight months – it’s gone crazy,” he says.
“The building costs in Ireland for an ordinary standard one-off house out the country would come in at about €130 to €150 per square foot, for a builder, and that is just a builder’s finish.
“But what we’re seeing now is that it’s gone absolutely through the roof. I would hate to hazard a guess at what it is now, but I know we are getting quotations in here and it’s up again €200 a square foot.”
As an example, he cites the cost of A393 mesh, the standard mesh used in concrete foundations: “A year ago it was €45 a sheet. And the sheet is the same size as a sheet of plywood. It is now €105. It went up to €75.
“Steel has gone through the roof and the next thing then is timber and PVC piping. If you saw what you would buy a year ago – in terms of timber – and what price it is now! That’s gone crazy. There is a shortage there. And then the other one is PVC piping, as in your ordinary Wavin pipe that you put in the ground: it has trebled in price – and the same with the fittings, it is difficult to get them.”
Damien Clear of Damien Clear Construction, whose company is involved in both the planning and design, doesn’t mince his words: “It is frightening: we are not sure where it is going to end. There is a slowdown in the increases, but they still are going on.”
He also cites the rocketing price of A393 mesh as an example: “I know someone who had to pay €130 for it,” he says.
“With timber, a 4x2 was €7: you won’t get it much cheaper than €13 now; a 9x2 was €14, it’s over €33 now; a bag of skim was €10 but you wouldn’t get it for €15 now.”
Sources tell him that concrete is expected to rise by between 5pc and 10pc in January.
One builder involved in commercial construction says the upward movement in prices became noticeable at the end of last year, but began gathering pace at the start of this year.
“There’s no control at all on costs for steel, timber, plasterboard, metal studs, anything like that. Also copper, electric cabling,” he says. “Everything has gone through the roof. PVC has gone up as well because of the oil thing and because of the scarcity of it as well.”
He has never seen prices rise at this sort of rate before.
“Materials-wise it’s definitely 20 to 25pc dearer than a year ago, and wages have gone up as well. So I would say it’s about 35pc dearer for a job.”
Engaged in the construction of private houses, as well as renovations and extensions, Noel McDonnell of McDonnell Carpentry and Construction, Ballymore, says it’s not just that materials are expensive: “The scarcity of materials is [also] the issue: bar you are in good standing with your supplier and keeping the bills paid, it is hard to get supplies.”
It’s tricky for tradespeople who have agreed a price with clients; but despite the increased materials costs, Noel wouldn’t be happy to go back and tell them it will cost more than the price agreed. “You are only as good as your word,” he says. “You agree the price at the beginning and then you try and get through the work as quickly as you can.”
While labour costs have risen, that rise has been dwarfed by the rocketing cost of practically everything on the long list of items that go into any building: “It’s all materials that are driving the price of house building.”
Insulation is “nearly gone unaffordable”; timber alone has jumped “five or six times” this year.
“And it’s in short supply. Everybody’s trying to buy up as much as they can.”
Huge quantities of timber are required in house building: “The biggest part of the timber use in the house is the roof, but then you have the internal finishes.”
Noel’s sympathies in this overheating marketplace are with young people who are building their first houses: “They’re the ones who are going to end up bearing all the costs,” he says, pointing out that while a builder will try and look after people the best they can and do good work, at the end of the day, they can’t afford to lose money at the job.
A further dimension to the rocketing costs crisis is the lack of certainty and the lack of stability it is introducing to the construction sector – something affecting not just the couple having a one-off house or a home extension, but developers of estates; local authorities or housing associations building homes; and commercial projects.
The result is that builders giving quotations are now only holding their tender prices for two weeks: “They used to hold their tenders for 90 days, and they are now building in clauses saying if materials go up, they will be passing on the costs – and that leaves a lot of uncertainty.”
John Madden knows of a 250-house development on the east coast currently on its fourth redesign because of costs. They started with block-built houses; shifted to timber frame; shifted again to concrete panels, and are now looking to change again, this time to ICF (insulated concrete formwork) – all in a bid to keep costs down as prices rise.
Damien Clear says if there is a positive, it is that it is encouraging contractor to look at other materials: “I think it takes a crisis like this for people to break the mould and start to look outwards for new building technologies such as ICF.
“It’s a little bit more expensive in the actual application but it saves a huge amount of time, and by virtue of that, you save a huge amount of risk, you are saving on labour, you are saving on air tightness, you are improving the product quality, in that it’s a fully sealed unit. It’s a stronger sealed unit, so it has a lot of physical benefits, but from a contractor’s point of view, one major benefit it has is that instead of being 10 weeks to bring a house up to gables, you can have as up in a matter of two weeks or two and a half weeks.”
Those eight weeks are becoming crucial in an environment where material costs are rising weekly or fortnightly.
Those in the sector agree on the factors that have led to the crisis. “A perfect storm” is how John Madden describes the arrival of the hike in materials costs at the same time as the labour shortage.
Brexit has been an issue, as has been the general supply-chain hold-ups affecting many countries. Along with that, Covid lockdowns in this country and elsewhere would have affected production and processing of materials.
Some of the reason for the hike in wood costs is “home grown”, Noel McDonnell explains: “The problem is the government are not giving felling licences,” he says. “That is leading to the shortage in timber and they’re importing a lot more, which has brought its own costs on top of that.”
Demand from the public is also an issue: “Builders are just inundated with work because everyone has a few bucks saved over the Covid period,” John Madden reckons.
“Another thing, I think, is during Covid there was a lot of work still going on, bits and pieces, so any surplus materials that were there were used up, and now we’re back into production but it’s going to take a while for that to get figured out.”
John has already gone public over his concern over how Ireland’s retrofit targets are to be met in light of the shortage of construction professionals and the long lead-in times for those in training through apprenticeships.
“A lot of the foreign nationals who are great in the building trade have gone back home, and they are not as quick to come back. So there is a massive shortage of labour.”
“People are now putting on hold building houses or extensions even though they have the money because the prices are gone crazy,” John adds – but at the same time, those who do want to press ahead with projects are finding it difficult to get anyone who is in a position to take on the job.
He is of the view they may well have a long wait ahead.
As to where things are headed, Damien is already seeing a scaling-down in the size of houses to save on costs.
“We’d love to see a full reduction in prices but I’m 20 years at the game and I have never ever seen prices come down significantly compared to what they have gone up. So if we’re looking at numbers of 20pc to 30pc even 60pc or, in extreme cases even 300pc, of an increase in material prices, the best you probably could hope for will be somewhere in the middle, that it would reset somewhere in the middle. But that hasn’t happened yet, and everyone is kind of looking at the new year to see if that will happen.”