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Surveyors warn of 10% rise in materials prices next year

Construction skyline — Image: Dreamstime/Hanohiki

Surveyors are expecting materials prices to rise another 10% over the next 12 months, with 7% growth in tender prices anticipated.

The Royal Institution of Chartered Surveyors (RICS) Construction and Infrastructure Survey found that construction is “broadly recovering well” from the covid-19 pandemic but that constraints on the market’s return to normality are beginning to appear.

The proportion of respondents pointing to a shortage of materials hampering the market during the second quarter of 2021 rose to 82%, up from 57% previously

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A +38% (net balance) of respondents reported a rise in construction workloads, with growth in the private residential sector continuing to lead the market, (+50% of respondents reporting an increase in activity). Surveyors also reported an increase in infrastructure works, with a net balance of +45% reporting an increase (up from +34% in the previous quarter).

But the survey also highlighted concerns about labour shortages, both for skilled labour and ‘white-collar’ roles. A net balance of +64% said a lack of labour will limit new activity (up from +42% in the previous quarter).

Nonetheless, respondents predicted construction workloads will continue to gather pace, with a net balance of +55% saying more activity is expected (the highest since early 2016) – with new infrastructure and residential expected to continue leading.

Simon Rubinsohn, RICS chief economist, said: “The tone to much of the feedback received in the Q2 Construction and Infrastructure Monitor is pretty upbeat with new business enquiries picking up smartly and this being reflected in the expectation that workloads will continue to grow strongly over the next year.

“Infrastructure and private housebuilding are viewed as likely to remain the most buoyant areas of the industry. Yet it is abundantly clear that a couple of issues present big challenges. Most notably at this point, the availability of building materials stands out as a key problem for respondents to the RICS survey.

“But almost as significant, labour and skills are increasingly being cited as obstacles for businesses looking to build out existing commitments or embark on new projects. For the time being, the issue appears most visible regarding skilled trades, but quantity surveyors are also being highlighted as an area of growing shortage.

“Unsurprisingly against this backdrop, some concern is being expressed about rising construction costs.”