Rising Materials Costs Impacting On Construction Growth

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The rising cost of building materials that were triggered by the effects of the pandemic and Brexit have continued to impact the construction industry this year. Development Finance Today (DFT) reports that this is having serious consequences for both homebuilders and development finance lenders.

Materials such as concrete roof tiles, cement, and bricks are facing supply chain problems, while prices for wood, cork, and straw, have been rising continually for almost two years. Coupled with a labour shortage, this is threatening the profits of property developers, particularly in London, where there is a high demand for new builds.

The Mayor of London Sadiq Khan said: “tackling London’s housing crisis is one of my top priorities; from City Hall, we have worked tirelessly to get London building again, but the twin effects of the pandemic and Brexit has hit both housebuilders and consumers hard. Put simply, materials and labour are needed to build homes.”

Khan has called on the government to release extra funding, and grant emergency temporary visas to ease the shortage of workers in the sector.

Brian Berry, chief executive at the FMB, said: “For over a year, small builders who deliver new housing and improve existing homes either through extensions or by retrofitting, have been struggling with the twin challenges of rising prices for essential materials and severe labour shortages.”

He added: “The latest State of Trade Survey data from the FMB shows these pressures aren’t going away, and there are now added fears about the impact of rising inflation.”

In the uncertain climate, the DFT advises developers to brace themselves for tougher lending criteria. The publication urges borrowers to use contractors of fixed price, to ensure that delivery targets can be met. Any risks should be calculated, so that finances are strong enough to withstand unforeseen price hikes.

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