Rising costs leave builders scrambling

Continuing supply chain pressure and widespread inflation are leading to cost increases for building supplies and causing builders to feel the pinch.

PlaceMakers, a building supplies merchant owned by Fletcher Building, announced it would raise the price of various construction staples over the next three months.

Framing timber would rise 15%, bagged concrete would rise 10%, and steel reinforcing would go up 8%, along with 13 other key construction materials.

Mark Trafford, the director of Maintain to Profit Renovations, said that in 15 years of working in the building industry he had ‘‘never seen anything like this’’.

Trafford said price increases on imported and New Zealandmade goods were coming at builders every week from every major supplier.

‘‘We are not talking 2% or 3%. We are seeing 10%, 15%, 20% and sometimes even higher. It’s a massive problem,’’ he said.

The price increases meant builders would have to pass costs on to customers, he said. ‘‘If we don’t, we will go out of business.’’

Costs were rising so rapidly that Trafford was asking clients to pay for materials on the day the job was signed off, to avoid a budget blowout. The cost price of his projects had increased 15% in the past year, he said.

John Tookey, a professor of construction at AUT, said the price increases would affect projects budgeted on fixed contracts, such as residential housing.

‘‘If your mortgage was for $1 million, and the cost increases to make the price of the build $1.2m, who is going to eat that price rise? Builders often can’t because they don’t usually carry a lot of strategic debt,’’ Tookey said.

Inflationary pressures would hit everything that gets built in New Zealand, he said.

Small businesses would be the most affected in the early stages, but larger businesses may also get hurt as the ‘‘virus’’ of failure crept up the food chain, Tookey said.

Infometrics principal economist Brad Olsen said the price increases represented continued pressure in the industry. The cost of residential construction rose 18% this year, which reinforced a costly trend of strained supply.

As larger merchants made it clear that builders should expect continued price increases, it signalled continued inflation in the building supply sector, he said.

While the price rises for certain products could be blamed on international events, a number of key building supplies also faced domestic issues that were difficult to fix, Olsen said.

‘‘The rising prices indicate a difficulty in securing products in general ... With a large amount of residential and infrastructure being built at the moment, this is going to have a run-on effect for the wider economy.’’