Two former chairmen of the Bahamian Contractors Association (BCA) warned yesterday that construction costs are likely to rise as much as 20 percent this year as cement has become the latest commodity to take a heavy hit.
Stephen Wrinkle and Leonard Sands have both warned project sponsors – ranging from multi-million dollar developers to residential home owners – to prepare for a significant price spike over the remainder of 2021 due to the post-environment environment. COVID facing the Bahamas and the rest of the world.
With cement supplies running low in recent days (see other story on page 1B), the duo reiterated that the increase in construction activity and demand for building materials combined with bottlenecks in ‘supply chain and shipping bottlenecks around the world to drive costs soar as the world continues to emerge from the pandemic.
Mr Wrinkle, warning that “every aspect of society is paying the price for COVID-19,” warned, “In all building materials and shipping, virtually every aspect of the industry is on the rise. It will be difficult to maintain the prices in the end because the entrepreneur cannot absorb this. There is not enough headroom in the industry to absorb this.
“Costs are increasing across the entire production and supply chain. It’s like a house of cards. It looks like this will continue until the end of the year, as it will take so long to catch up. Whenever a contractor fixes the price of a job, he must take into account the increase in the price of labor and materials. They have to take that into account one way or another.
While larger construction contracts contain clauses that address price / cost increases, Mr Wrinkle warned that the situation threatens to leave “the average homeowner with a fixed mortgage” exposed. The push for building materials alone could put building such a person’s house beyond their financial reach, especially if they are unable to secure additional financing from the bank or other lumber. commercial.
With plywood, an essential building material used in almost every aspect of construction, the price of which has doubled in some cases, the former head of BCA told Tribune Business: “You could see an increase from 10 to 20. % of construction costs during this period. year. Consumers can expect to pay 10-20% more this year if the current trend continues.
“Most of our suppliers have tried to absorb the increase, and contractors have tried to absorb it, because all orders placed today must reflect these increases. I ordered material in January, and if I ordered the same now, I would pay 10-20% more.
“To bring it to Nassau, it’s a 40% increase because of tariffs and VAT, and materials are typically 40-50% of the job. You have a 20 to 40 percent increase on materials, with a shortage of plywood. This is unprecedented territory for us, ”Wrinkle said.
“This phase we are going through is particularly devastating. It’s not related to the industry; it’s linked to COVID-19. It’s totally out of the control of the construction industry, it’s totally out of the control of the consumer, it’s totally out of government control. We are all in pain. Every aspect of society is paying the price for COVID-19. “
Mr Wrinkle suggested that the current situation could reignite talks on “sticking” building materials so that import duties and VAT are only paid when sold, rather than at the border. “This gives credence to discussions of bonded materials entering the country,” he said.
“It affects businesses by having to pay so much tax up front. Car dealers have obtained their surety status. To facilitate this, we need to carry the duty and VAT back to the point of sale. Some vendors spend over $ 50 million a year bringing in materials and that’s a lot of money.
The government is relying heavily on construction to stimulate and stimulate the post-COVID economy, and the combination of supply shortages and price increases threaten to disrupt its plans by causing delays and deterring projects still underway.
Mr Sands, meanwhile, echoed Mr Wrinkle’s impact assessment, saying, “I would safely say that you’re probably going to see a 15-20% increase in construction costs over to pre-pandemic levels. Everyone is going to have to adjust to the increase in the price of the materials they will pay, and this will have a net effect on the pricing of construction contracts.
“It’s global. We will feel the pinch. It will last a long time. I think for the next 12 months we can see this outfit. After that, it will be towards the end of 2022 that we will bring it back to normal, which we consider to be normal after this pandemic. It will be around the third and fourth quarters of 2022. “
Mr Sands added that all lumber, from plywood to raw lumber, has been “hit hard” by production and shipping bottlenecks as the two industries try to catch up. booming global demand following COVID-19 lockdowns and other health measures.
“I have seen significant price increases, in some cases 100%, but on average 60 to 70% compared to what it was in 2020,” he revealed. “It’s a big amount to pay for a product that we use in all aspects of construction, from start to finish. “
Delivery times, Sands said, were also affected. “What is interesting is that, after the pandemic, orders for major items like windows, right off the bat, allow more than 40 weeks for delivery, whereas before the pandemic, they allow six to eight weeks. “, he added. . “What we’re hearing is that the shipment is late because there are so many orders that people are trying to catch up. It creates a nightmare.
Mr Sands added that the government will need to factor in the increase in the prices of building materials and other costs in its 2021-2022 budget projections, as this will increase the price of its capital projects as well as the revenue from it. ‘impact.
And reconstruction after Hurricane Dorian in Abaco and Grand Bahama will also be affected by the availability and costs of building materials.