The rising prices of building materials are becoming a headache to ordinary people, developers and the state alike, pushing up construction costs of all kinds.
Disrupted supply chains, higher energy prices and the re-opening of economies after lockdowns are factors behind the more expensive building materials, while the higher demand fed by the post-pandemic economic revival and recovery plans will lead to further pressure on prices.
“Price hikes are a kind of natural defense mechanism for the market - when there is too high a demand or a problem in supply or both, [the market] tries to make up for this imbalance by changing the price — and that is the situation we have found ourselves in,” Matej Horňák, an analyst of Slovenská Sporiteľňa bank, told The Slovak Spectator.
Part of a global trend
The growth of prices of building materials is not only a problem of Slovakia or neighbouring countries, but it is a global trend, where the prices of some commodities have increased by tens or hundreds of percent year-on-year.
“Demand for consumption is strong, governments have taken a number of measures and poured trillions of dollars into the economy,” František Burda, investment analyst at FinGO.sk, told The Slovak Spectator. While the analyst expects a further rise in building material next year as well, he admits new virus mutations may slow it down. "We are already seeing more lockdowns around the world."
The rising prices of building materials increase the construction costs of all kinds of buildings by 10-25 percent depending on the material structure, noted Pavol Kováčik, chair of the Association of Construction Entrepreneurs of Slovakia (ZSPS), while he expects that the growth has not hit its ceiling.
The impact of this increase on real estate prices differs from the locality, the type of construction and the phase in which the project is. It is therefore difficult to quantify the situation, especially in the context of generally rising real estate prices, noted Rudolf Bruchánik, senior analyst of Bencont Investments.
“In locations with low real estate prices, the rise in material prices may be more pronounced, as developers operate with low margins and the increase in material prices must be passed on to real estate prices as much as possible,” said Bruchánik. “In localities with higher real estate prices, the increase in the price of building materials at the final price may be less pronounced.”
Kováčik noted that higher building material prices combined with a scarcity of flats will push prices up.
“Until next year, the prices, in particular for flats, will go up by some 10 percent,” said Kováčik, adding that prices will continue to grow.
Steel, wood as well as cement more expensive
19. Aug 2021 at 17:06 | Jana Liptáková