Will the rise in building material prices continue?

Construction is one of the sectors hit very hard by the pandemic. Construction output fell sharply during the crisis and has not yet recovered.

Many construction companies have cut back on investment or postponed planned construction until later. In September this year, our construction output was still lagging well behind the pre-pandemic period (September 2019) – by as much as 23 per cent. Year on year, construction output in September was 4.7 per cent lower.

What is the forecast for the coming period? Will it get even worse, or is the worst already behind us? Have we experienced anything similar?

As some larger investment projects will be “shelved” for the time being, demand for building materials is likely to fall. If that happens, suppliers will be forced to change their sales strategy.

It can be assumed that the entire Central European region may go down this path. It is also a fact that the skilled workforce is shrinking, and we can therefore assume that construction will become automated and prefabricated over time. Construction output could start rising again in 2023.

Can we expect construction output to be weaker year on year also as a result of the raw materials crisis?

The raw materials crisis is here at the moment and will very probably stay with us for some time yet. Composite materials are arriving on the construction scene as an alternative, so that the shortage of traditional building raw materials can be made up for.

It is likely that the prices of many building materials also rose speculatively, as sellers followed the market situation and factories restricted production in order to push up the price of materials in short supply.

Today, construction companies are experiencing shortages of materials, and in particular windows, glass, timber, mineral wool, PVC pipes, bricks and roofing. It is difficult to predict at the moment, but we could see a certain degree of price stabilisation for building materials as early as 2022.

How much will this situation affect the prices of the construction work itself in the coming period? For comparison, in September this work was 8% more expensive year on year!

Viktor Obtulovič, property market expert, FinGO.sk: Inflation goes hand in hand with the prices of building materials and construction work. Only a fall in demand can stop the continuous rise in prices. If construction slows down, less labour will be needed and the price of work may stabilise for a longer period.

The problem is the ever-decreasing number of skilled workers, which is being offset by workers from abroad, but there are limits there too. “Salvation” may come in the form of new technologies and construction methods that will no longer require such a large workforce.

Will development companies complete their projects (flats, houses) at the price they declared?

In the next two to three years, development companies will complete their existing projects under construction. Developers may apply an inflation clause in cases where they have signed one with the client in the contract. In that case, new housing may cost clients as much as several thousand euros more. The question, however, will be whether construction of new planned projects will begin or whether they will be postponed indefinitely.

What would you recommend to those who have already bought their dream plot to build a family house but are put off by the excessively high prices of building materials? Does it make sense to wait for a more opportune time?

The plot will not lose value; its value will keep rising. If a client needs to build a house for their own needs, they can safely go ahead and do so now. There are many alternative ways to build a house for a reasonable sum. Clients need to look around more for other suitable and affordable alternatives when building.

Rising prices of building materials, as well as high prices of plots for family houses, are forcing builders to look for ways to save money. One of the ways to save is to have a high-quality family house design drawn up. The premise is that a good design = a good house. How can such a bespoke design save the investor money during construction?

EU legislation is tightening the energy performance requirements for buildings. This affects the technologies used and drives up construction costs. Today we build to the A0 energy standard, and the costs of such a standard are as much as 20 per cent higher than a year ago.

The payback period through the house’s operating costs is around 15 years and will gradually shorten. Clients must consider the long-term lifespan of buildings. Family houses will tend to be built smaller, but the quality of construction will increase.