If you plan to build a new home or improve an old one, you have to factor in the rising cost of construction materials. Over the last year, the price of construction materials, including steel, timber, bricks, and plastics, has soared, putting pressure on property developers and contractors.
Without the room to adjust pricing for existing contracts, most contractors are forced to pass the additional costs on new projects. But why are these costs going through the roof? This article offers a few reasons for the building cost inflation.
Increasing Demand for Construction Materials
As the world recovers from the devastating COVID-19 pandemic, the world construction output has soared drastically, putting pressure on manufacturers and suppliers of construction materials. Since the manufacturers cannot meet the rising demand, the construction industry is experiencing a limited supply of materials, which has led to a sharp increase in prices.
Resilient World Construction Output
Although some construction industry sectors were severely affected by the COVID-19 crisis, the overall industry remained resilient. This has resulted in continuous demand for construction materials. Consequently, the prices of construction materials have continued to rise, putting pressure on contractors and property developers who are currently facing a severe financial crunch.
When COVID-19 struck, many manufacturers were forced to shut down their factories. Their employees were required to stay at home during lockdowns and curfews to avoid the spread of the virus. This led to a limited supply of construction materials like timber, cement, plastics, etc. As a result, the cost of building materials went up.
When the pandemic struck, the demand for construction materials went down a bit while inventories went down across the board. People were more concerned about where the pandemic was going to leave the economy. This forced the dealers to cut back, naturally, and so did producers. Then there was a surge starting last spring, and everyone was caught a little flat-footed. This has led to a sharp increase in the cost of building materials across the world.
Unfortunately, this situation is expected to continue in the coming months.