Hello everyone, my name is Alex. I am the founder of the Finnish house company engaged in low-rise construction. In 2021, only the lazy did not write about the prices of materials, but now it’s more interesting what awaits us in 2022, will there be a “rollback” in prices and does it make sense to wait if you wanted to build a house?
Let’s start with 2021, what happened?
I’ll start with what happened in 2020 and 2021 with construction, with an emphasis on low-rise buildings. I won’t dive deep, rather it’s for those who are interested, but missed everything.
As soon as the pandemic began and the borders were closed, quarantines were introduced, people rushed eon masse out of the city.
People massively began to buy plots, someone with the aim of building a summer house, someone decided to implement long-awaited plans to move out of town.
All this dramatically increased the demand for construction and, accordingly, for building materials. And where there is demand, there is a shortage and rising prices.
Curiously, this turned out to be a global trend. In many countries, especially in the US, demand has been specifically fueled by “infusions” into the economy against the background of the pandemic. Those who did not build anything decided to take up long-delayed “repairs”. In Russia, the “preferential mortgage” for apartments has significantly dispersed the market.
What did it lead to?
The increased global demand for construction and repairs has created a shortage in the building materials market. Demand has grown, and the capacity of manufacturers is not rubber. In addition, during lockdowns and quarantines, many global manufacturers “paused” and were unable to quickly restore work, and some even went bankrupt.
All this together led to the fact that there was a shortage of building materials on a global scale, and since the fall of 2020, their cost has begun to rise. Pay attention – this happened all over the world, and not just in our country. In America, for example, already in April they made memes on the topic of more expensive board materials and wood.
The apogee of growth occurred in April – July 2021. As a result, since the fall of 2020, many key materials have increased in price by 2-3 times. Other materials have risen in price in general by 30 percent or more. Of course, something has risen in price not so much, for example building mixtures, but globally they do not affect the picture.
A curious topic occurred with aerated concrete, in early spring, against the backdrop of a sharp increase in wood, many turned their attention to aerated concrete, such as it has now become cheaper to build from it. As a result, they swept away all the aerated concrete that was available. Production is not rubber and can not dramatically increase the volume. Therefore, aerated concrete simply disappeared for a while. And the price has almost doubled.
Will material and construction prices drop in 2022?
Now the most interesting. By autumn, the rapid rise in the cost of materials had stopped. That is, there were no situations when a product could rise in price by 30% within a week. Something “rolled back” almost to the previous prices. For example, OSB boards have grown 3 times, and now they cost “almost” the same as before.
Nevertheless, most prices have froze, and a quiet creeping growth continues for a number of positions, a little bit every month. For example, heaters, window products.
Unfortunately, I am 90% sure that a tangible reduction in the prices of materials should not be expected. Well, if something falls by 10-15 percent. But most likely, on a number of positions, we, on the contrary, will see continued growth.
But even in the case of a slight decrease in the cost of materials, construction as a whole will rise in price.
Many believe that the “builders” benefited from the situation with materials. But this is not so, builders are the same “consumers” of materials as ordinary buyers. We do not manufacture or resell them. In 2021, some companies went bankrupt altogether, as they took “advance payments” in 2020 and were unable to fulfill their obligations amid rising prices. For the rest, the margins of the business have declined sharply. Since the costs have increased, but the cost of work has not.
An interesting situation has developed with the labor force. Therefore, at the level of ordinary workers, a “personnel shortage” arose – there were simply no more working hands. The shortage of labor also leads to an increase in its cost. Many workers began to demand an increase in rates by 20-30%.
It must be understood that a construction company is not only a “team”. There are production facilities, warehouses, logistics, office staff, rental of premises and equipment – a construction company is a whole structure. And since the content of this structure is also growing due to the general acceleration of inflation, companies have no other choice but to increase the cost of work. Otherwise, the business may become unprofitable and all this will end badly – bankruptcy and failure of contracts, deceived by the expectations of customers.
Construction in 2022 will not become cheaper and most likely will rise in price even more. How much is difficult to say. I think the situation will be clear by the spring of 2022, when the new “season” begins.
So if you were planning to wait – think carefully. Because it won’t be cheaper. If you planned to build, you could give the following recommendations.
1) If you have money at the limit and there is no understanding of the prospect of their receipt – postpone the construction site, until it is abandoned. Otherwise, there is a great risk of being left with “unfinished”, “unfinished” or nothing at all.
2) Explore lending options. Credit “bondage” is not the best scenario, but now there are more opportunities for lending to suburban construction on more or less acceptable terms
3) Analyze your Wishlist. It might be worth reducing them. Reduce the area, simplify the architecture, pay attention to other technologies, not the ones that you considered before. This will allow you to reduce the construction budget, while still getting a quality and well-built home.
4) Be careful about breaking down the construction into stages. In this way, construction and financing can be stretched. But here it is important to understand the level of your income and their prospects, so as not to be left with a “long-term construction”.