RISING COSTS OF building materials are putting homes “further and further out of reach” of people who need them, the Irish Home Builders Association (IHBA) will tell TDs later today.
In their opening statement to the Joint Oireachtas Committee on Housing, Heritage and Local Government, Director of the IHBA James Benson will tell TDs and Senators that recent increases in material costs are not helping with the affordability of housing.
“Affordability remains challenging and recent extraordinary increases in the costs and availability of materials do not help. Supply is not meeting demand,” Benson will tell politicians.
“With mounting construction costs home builders are challenged to bring new homes to the market at a level that average income earners can afford.
“Residential material costs are going up on daily basis and putting homes further out of reach of those who so desperately need them.”
Benson will say that the situation is getting worse on a weekly basis and that if this increased cost of delivery isn’t added to the purchase price of a home, the pre-tax profit margins drop and builders will not meet the criteria to finance the development.
He will add that where this price is added to the purchase price of a home, it diminishes the ability of a consumer to secure a mortgage and “those currently ‘locked out’ of the market are further restricted”.
The group will also tell TDs and Senators that half of the cost of bringing a new house to the market is made up of so-called ‘soft costs’, including VAT, taxes, land costs and professional fees.
“These costs are often incurred over years in advance of commencement. There is potential to streamline those costs, deliver homes sooner, reduce costs and make homes more affordable,” Benson will say.
“There is a difference between construction costs and development costs and asking the new home purchaser to pay for all these soft costs is inequitable when compared to the second-hand home market.”
The Society of Chartered Surveyors Ireland (SCSI) are also set to tell the Joint Committee that the increased construction costs are due to both the current levels of inflation as well as price volatility for building materials.
Earlier this month, it was announced that the Government would be paying up to 70% of inflation-related costs on State projects, with Public Expenditure Minister Michael McGrath saying it was due to the threat of projects not being completed.
According to the SCSI, these are particularly insulation, cement, plasterboard, metals and fuel, alongside labour shortages and high demand for housing projects.
“In respect of the first half of 2022, it’s clear Russia’s invasion of Ukraine is having an impact on the price of materials previously sourced from the region especially steel and base metals while it has also led to a dramatic increase in fuel and energy costs,” the SCSI will tell TDs.
While the SCSI will say there is no single solution to the rising costs, it will require a “proactive and cohesive” response from the Government, while suggesting that local authorities are resourced to allow for faster processing times.
Labour shortage
The IHBA are also set to raise concerns about the labour shortage within the construction industry, saying that 27,000 more workers are needed within the residential construction industry to meet Government targets.
“While we are already witnessing greater numbers enter the sector across the various professions and trades, we need to continue to make the sector attractive to new entrants and remove current blockages,” Benson will say
“Work permits for those coming from outside the EU are currently taking 16 weeks, this is too long to expect someone to wait when we badly need workers,” adding that additional resources are set to be implemented within the Department of Enterprise.
The IHBA will also call for an improved trade traineeship model that would range from six to 18 months, depending on the type of work.
I havent a clue about construction, but maybe a reader of this could confirm how things look for me. If Prices keep going up and up eventually it will get to a stage where these will become too expensive , in which case people wont buy. Would this lack of buying lead to a small decrease to a threshold which is affordable, or lead to a crash? (My assumption would be the first one)
Well then, looks like its time for another handout to developers.
Can’t buy, can’t build, can barely rent.
Steel price for the next three months is not that much higher in my industry. Still an increase. But our supplier is saying they have had customers cancel projects because their price is too high. On the other hand there are shortages too, so they can basically do what they want with the prices. We pass them on to our customers, who pass them on to theirs…
I have been trying to buy a few furniture boards, nobody has enough in stock. Last time I checked my shopping cart online in B&Q, it warned me that the price increased by 1.5 euro per board, never the less, they don’t have stock anyway.
Combine this with rising interest rates and soon no one will be able to afford houses. We could end up seeing a big correction in house prices probably sooner rather than later.
My father works in construction and has already noticed an increasing number of people choosing not to go ahead with work due to the cost.
It sounds like Europe needs to rationalise resource usage while working on ways to increase supply.
It’s certainly hard to justify construction projects outside of apartments in Ireland at present, given the squeeze on both labour and material.
Supply building materials can confirm costs have gone up but the major jumps came in march. I was so worried that i wrote to my local TD who raised the question with minister for housing. Again this was feb/march. So im not sure where this article is coming from.
I am happy to post the reply from the minister if people are interested
Why are materials going up?
Sure, there is demand, but it’s not like suddenly there are more houses needed. This has been gradually building up and manufacturers knew this…
I’m currently building a house at the moment. We are ploughing on regardless. As e eryone in the industry has said they have never seen prices come down. Things will level off, but the high price will become the new normal.
Look where we are with the fuel prices. They came down a little but still around 1.85-1.90 a litre.
The cost of materials is only about 14% of the total build cost of any house. The rest is wages and profit.
Stop falling for this nonsense from the builders who are demanding 2x more more money.
Seems like depression is going to be a common theme with the majority of Irish people for the next couple of years.
We need to move away from costly brick, concrete, steel buildings and move to timber framed and clad houses. One of the big objections to this is fire safety but this can be built into the building plans. Europe is moving towards more wooden buildings, Ireland should consider it too.
15 comments
RISING COSTS OF building materials are putting homes “further and further out of reach” of people who need them, the Irish Home Builders Association (IHBA) will tell TDs later today.
In their opening statement to the Joint Oireachtas Committee on Housing, Heritage and Local Government, Director of the IHBA James Benson will tell TDs and Senators that recent increases in material costs are not helping with the affordability of housing.
“Affordability remains challenging and recent extraordinary increases in the costs and availability of materials do not help. Supply is not meeting demand,” Benson will tell politicians.
“With mounting construction costs home builders are challenged to bring new homes to the market at a level that average income earners can afford.
“Residential material costs are going up on daily basis and putting homes further out of reach of those who so desperately need them.”
Benson will say that the situation is getting worse on a weekly basis and that if this increased cost of delivery isn’t added to the purchase price of a home, the pre-tax profit margins drop and builders will not meet the criteria to finance the development.
He will add that where this price is added to the purchase price of a home, it diminishes the ability of a consumer to secure a mortgage and “those currently ‘locked out’ of the market are further restricted”.
The group will also tell TDs and Senators that half of the cost of bringing a new house to the market is made up of so-called ‘soft costs’, including VAT, taxes, land costs and professional fees.
“These costs are often incurred over years in advance of commencement. There is potential to streamline those costs, deliver homes sooner, reduce costs and make homes more affordable,” Benson will say.
“There is a difference between construction costs and development costs and asking the new home purchaser to pay for all these soft costs is inequitable when compared to the second-hand home market.”
The Society of Chartered Surveyors Ireland (SCSI) are also set to tell the Joint Committee that the increased construction costs are due to both the current levels of inflation as well as price volatility for building materials.
Earlier this month, it was announced that the Government would be paying up to 70% of inflation-related costs on State projects, with Public Expenditure Minister Michael McGrath saying it was due to the threat of projects not being completed.
According to the SCSI, these are particularly insulation, cement, plasterboard, metals and fuel, alongside labour shortages and high demand for housing projects.
“In respect of the first half of 2022, it’s clear Russia’s invasion of Ukraine is having an impact on the price of materials previously sourced from the region especially steel and base metals while it has also led to a dramatic increase in fuel and energy costs,” the SCSI will tell TDs.
While the SCSI will say there is no single solution to the rising costs, it will require a “proactive and cohesive” response from the Government, while suggesting that local authorities are resourced to allow for faster processing times.
Labour shortage
The IHBA are also set to raise concerns about the labour shortage within the construction industry, saying that 27,000 more workers are needed within the residential construction industry to meet Government targets.
“While we are already witnessing greater numbers enter the sector across the various professions and trades, we need to continue to make the sector attractive to new entrants and remove current blockages,” Benson will say
“Work permits for those coming from outside the EU are currently taking 16 weeks, this is too long to expect someone to wait when we badly need workers,” adding that additional resources are set to be implemented within the Department of Enterprise.
The IHBA will also call for an improved trade traineeship model that would range from six to 18 months, depending on the type of work.
I havent a clue about construction, but maybe a reader of this could confirm how things look for me. If Prices keep going up and up eventually it will get to a stage where these will become too expensive , in which case people wont buy. Would this lack of buying lead to a small decrease to a threshold which is affordable, or lead to a crash? (My assumption would be the first one)
Well then, looks like its time for another handout to developers.
Can’t buy, can’t build, can barely rent.
Steel price for the next three months is not that much higher in my industry. Still an increase. But our supplier is saying they have had customers cancel projects because their price is too high. On the other hand there are shortages too, so they can basically do what they want with the prices. We pass them on to our customers, who pass them on to theirs…
I have been trying to buy a few furniture boards, nobody has enough in stock. Last time I checked my shopping cart online in B&Q, it warned me that the price increased by 1.5 euro per board, never the less, they don’t have stock anyway.
Combine this with rising interest rates and soon no one will be able to afford houses. We could end up seeing a big correction in house prices probably sooner rather than later.
My father works in construction and has already noticed an increasing number of people choosing not to go ahead with work due to the cost.
It sounds like Europe needs to rationalise resource usage while working on ways to increase supply.
It’s certainly hard to justify construction projects outside of apartments in Ireland at present, given the squeeze on both labour and material.
Supply building materials can confirm costs have gone up but the major jumps came in march. I was so worried that i wrote to my local TD who raised the question with minister for housing. Again this was feb/march. So im not sure where this article is coming from.
I am happy to post the reply from the minister if people are interested
Why are materials going up?
Sure, there is demand, but it’s not like suddenly there are more houses needed. This has been gradually building up and manufacturers knew this…
I’m currently building a house at the moment. We are ploughing on regardless. As e eryone in the industry has said they have never seen prices come down. Things will level off, but the high price will become the new normal.
Look where we are with the fuel prices. They came down a little but still around 1.85-1.90 a litre.
The cost of materials is only about 14% of the total build cost of any house. The rest is wages and profit.
Stop falling for this nonsense from the builders who are demanding 2x more more money.
Seems like depression is going to be a common theme with the majority of Irish people for the next couple of years.
Demand for US houses is starting to take a hit https://www.bloomberg.com/news/articles/2022-05-24/housing-market-shows-cooling-signs-after-interest-rate-hike
We need to move away from costly brick, concrete, steel buildings and move to timber framed and clad houses. One of the big objections to this is fire safety but this can be built into the building plans. Europe is moving towards more wooden buildings, Ireland should consider it too.