DONEGAL’S house prices could be pushed up significantly by the soaring cost of building materials.
Contractors across the county have reported a sharp increase in the price of hardware as the construction industry rushes to make up for time lost to the pandemic.
A new report from the Irish Home Builders Association  (IHBA) predicts that if the price hikes continue, the average cost of building a three-bed semi could rise by between €12,000 and €15,000 by the end of this year.
Figures compiled by the IHBA show that timber costs have increased by almost 16 per-cent in the past 12 months while steel has risen in price by 23 per-cent. Softwood has gone up by 31 per-cent while less obvious items like metal studs and mesh have also inflated substantially in cost.
According to Justin Molloy, Director of the Western branch of the Construction Industry Federation which covers Donegal, the pandemic has played a major role in prices rising across Europe. But other factors, some of them economically specific to Ireland, have also had an impact.
“Inflation is happening across a range of materials and there are a number of reasons, one of them being that Covid shut down factories and stopped production,” Mr Molloy said.
“The Irish construction industry wasn’t helped either by the fact it was closed for the first five months of 2021 while everywhere else was operating.
“But another factor is the situation we have here in Ireland with regard to felling trees. An awful lot of softwood would come from Ireland but there have been issues around tree felling licences so that has meant importing softwood instead which is making it more expensive.
“Then you have Brexit which has impacted on the importation of materials, you have shipping container displacement due to Covid and you have your general inflation.”
The situation has become particularly problematic for firms tied to public works contracts. Many were awarded jobs based on prices agreed pre-pandemic. But on their return following months of shutdown they now face increased material costs which are eating into their profit margins.
‘Onerous’
Mr Molloy described the contracts, the majority of which offer no clause whereby builders can claim for increased costs, as “onerous”.
“For example if someone is building an office block and they priced it expecting to start work in January but only got back on site in May when the prices were up, they can’t claim those increases back.
“It is a very difficult situation for people on fixed price contracts and it is difficult for those tendering for jobs into the future when they don’t know what the price will be. Suppliers are regularly updating their prices but at the moment those prices are not staying for very long.”
The problems facing the construction may only be short-lived however. The Construction Industry Federation says that with the world’s economy gradually emerging from the pandemic, it expects to see a welcome shift backwards in the pricing landscape.
“What we would expect is that over the next six months, possibly by Christmas, production will have caught up and prices will have come back again. That is what we are hoping, that production facilities will have caught up, they will be getting the materials out again and that will fill in the gaps we are seeing at the moment.
“Prices may never come back to what they were but hopefully we will see a certain amount of price stability.”