Building costs blamed on materials

Posted On Wednesday, 17 September 2003 02:00 Published by eProp Commercial Property News
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THE building industry has blamed high price increases over the past year mainly on building material price hikes, some of which far exceed inflation.

Construction IndustryTHE building industry has blamed high price increases over the past year mainly on building material price hikes, some of which far exceed inflation.

"The sharp rise in builders' input costs is cause for concern for the industry," said the Building Industries Federation of SA (Bifsa) in its annual report, which was released this week.

Building material price increases and keen competition detracted from the profitability of companies in the sector. Importantly, there was also a strong link between building material price increases and the affordability of housing, offices, factories and other buildings.

The building industry differed from the construction industry as it excluded all infrastructure projects.

Building material prices rose close to 10% in the year to June, said the report.

"Certain building materials manufacturers have raised their prices far in excess of general inflation," said the report. Cement building block prices rose 20% and galvanised sheet metal rose 32%.

Suppliers of plant and equipment raised their prices about 28% in the year to June. Many plant items were imported, however, rendering these suppliers highly vulnerable to currency fluctuations. High labour costs also contributed to price increases.

Meanwhile, Johan Snyman of Medium-Term Forecasting Associates said in the report that good demand for building last year led to a slowdown in the number of liquidations in the sector.

Snyman said 371 companies were liquidated last year. This compared well with 554 liquidations in 2001. "Nevertheless, more than 1400 (construction) companies were unable to weather the storm during the past three years," he said.

Building demand rose 2,2% last year to about R33bn, boosted mainly by strong growth in demand for housing.

The outlook for the building industry this year was less rosy.

Snyman projected zero growth in the sector this year, based on a slight rise in residential building work and a slight contraction in nonresidential building such as factories and offices.

He based this forecast mainly on the delayed effects of interest rate increases last year.

Conversely, interest rate reductions this year augured well for building demand in 2004, he said.

Meanwhile, the building industry said it was also concerned about sporadic shortages of labour and building materials.

This could lead to labour piracy and a drop in the quality of labour, said Snyman in the report.


Last modified on Saturday, 26 October 2013 11:54

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