What is happening to construction costs?
We have been working with Davide di Martino from Unagru Architects https://www.unagru.com recently on a project in Richmond. The project is to demolish a bungalow and replace it with a two-storey house. During this time construction costs have seen a big change.
We first met our clients in October 2019, but they would have been working with Davide long before that. In that time unprecedented changes have happened, and Davide has written a bit of an explanation!
The aim of this blog is to help you understand what is going on, how long it might last, and what we should all do to reduce the impact of the increases.
So, how much have construction costs increased?
Davide believes construction costs have increased somewhere between 35% and 40% in the last two years. The main leading causes can be broken down into three areas.
Firstly, construction materials became 25% more expensive in the twelve months before October 2021, putting the total increase from 2019 at about 35%. The cost increase is primarily due to the pandemic’s effect on supply chains and raw materials.
A slight reduction in growth in December eased this pressure temporarily, but the materials shortage is like to carry on for some time. The products worst affected are roof tiles, timber, steel, cement and paint. (Source: HomeBuildingUK)
Secondly, Brexit has caused a considerable exodus of European workers from the UK and the Government has estimated a formidable loss of workforce. Fewer builders mean they are in high demand and able to ask for higher wages, plus due to the higher demand the response to tenders tends to be slower.
Finally, contractors are faced with the only option to increase salaries to keep their workers and spend more to secure materials. They also need to spend more time and money procuring and stocking materials to avoid the risk of running out of critical products during construction.
What can homebuyers and architects do to improve the situation?
Speak to people you can trust.
When discussing a new project, make sure to get a complete picture of all the costs you need to factor in. Several contractors and professionals provide partial figures to avoid scaring away potential clients, a good architect will set out for you the full scope of the costs, or speak to an independent quantity surveyor.
Choose the right project and learn to prioritise.
Prioritise projects on your home with the potential to add floor space and therefore, tangible value to the property.
Even within one project, some items are more important and urgent than others. Replacing the existing windows, for example, can often wait one or two years without affecting the main construction programme.
Invest some time and money in an early cost estimate.
About four weeks in, the main aspects of the project should be pretty established. At this moment we would recommend you investing one day and a few pounds towards an updated cost estimate, CLPM Cost Estimating as this might save you time and money later down the road. Constantly gauging construction costs will avoid any possible re-design fees and save precious time during the tendering stage.
Take your time to select the builder.
With so much demand, builders may be tempted to raise their prices to accommodate prospective clients or increase their profits.
What do CLPM say!
As a result of these factors, expectations are not being met in terms of what can be achieved for your budget. In some instances, projects that have been in the planning stages for some time, are no longer affordable. This can result in disappointment, or worst still, insufficient funds are in place to complete a project that has already commenced.
It is therefore more important than ever to seek cost advice at the earliest possible stage of your project. CLPM Cost Planning
It is important to have a feel for the square meterage that you are building or adding to your existing property, the extent of the works that you are intending to carry out and the level of finish you are hoping to achieve. Then an initial discussion can be had with your cost consultant at CLPM.
This will focus on the likely range of construction costs for your project based on current market rates.
CLPM can also advise on other costs that you need to budget for in relation to the project. Such as professional fees, surveys, planning costs, insurances etc, and the level of contingency that you should allow for works that may not be envisaged at the outset.
Once you are satisfied that your expectations tally with your budget, and the design development is underway, CLPM can then refine these costs to more accurately reflect the design details and provide you with greater confidence that your plans are achievable. If needs be, and in conjunction with you and your architect, CLPM can also look at alternative cost saving design solutions to keep your project on track. CLPM Cost Management
With higher construction costs, it becomes more important to think carefully and seek advice from the earliest stages of your project (from the imagination stage, to be precise). Before committing your mind to a specific property it might be a good idea to speak to a professional to figure out the main parameters of the project you can afford and that suits you best. Favour properties that can be extended over ones requiring only remodelling to preserve the value of the investments and, ideally, choice a property you can live in for some time to avoid spending money on both your rent and mortgage.
Originally copy was written by Davide di Martino and can be read here https://www.unagru.com/single-post/what-is-happening-to-the-construction-costs-and-what-can-you-do-about-it