The Building Blocks Costs Crisis, Will it End Soon?

Marko Leon
November 11, 2021
Building Blocks Costs Crisis

How Did the Building Blocks Crisis Begin?

The building blocks crisis of 2020 began with the Covid19 pandemic. As the entire world economy stopped and suffered the consequences of lockdowns, so did the construction industry. When the coronavirus lockdown started, the supply chains get disrupted. Shipping and transportation costs, lengthening of lead times, increasing demand, and the shortage of labor all affected the crisis. The lockdown forced suppliers to change from a global to a local reliance regarding the materials.

Why Does this Building Crisis Exist

The prices continue to increase as there is a 6-9 months delay in the effect on the sales prices. As a result, during the Covid19 global pandemic crisis, the demand for supplies climbed. The supply chains are struggling to catch up with the high demand. The volatility of building blocks prices continues to rise as the materials are hard to find and the demand is high. The suppliers have to maintain competitive prices in order to remain in business and make a profit.

Which Countries Got Affected the Most

The Coronavirus affected all countries around the world and their economies. In the United States, according to PBC Today Research, the prices of housing have reached an all-time high. 

Whereas in the EU, according to Eurostat ING Research, the prices of building blocks materials, such as steel, concrete, bricks, cement, will remain high at least until mid-2022.

In the United Kingdom, other than Covid19, Brexit had an impact on the rise of construction material prices. The shortage of labor, lorry drivers are just some examples of the Brexit labor challenges. Many workers were forced to abandon their status in the UK due to Brexit which limited their work rights. In the UK, lead times increased from approximately two days to 2 weeks, creating a construction delay.  

How does the Building Crisis Affect the Real Estate Investment Market?

Firstly, the lack of material leads to higher prices of supplies and construction delays, hence affecting housing affordability. 

Secondly, supplier delays, loss of staff, mostly drivers, government regulations all created a series of compounding issues and market changes. Analytics claims that the predictions are negative and that a price rise is likely to continue. The price rise of building blocks is estimated to be 15% every year. The Bank of England predicts that the inflation rate will continue to rise by 4%. This forecast shows us that, for the time being, there is no quick solution to this crisis. Thirdly, on the global plan, the prices of transportation and shipping are climbing at a record high. Shipping prices from China have increased ten times. There is an extremely high demand for steel in the world. 

What Solutions are Offered?

From this point of view, it is uncertain how the national economies will handle this problem. One possible solution can be stricter control on behalf of the Government. Another option is for the Commerce Department to investigate the shortage of supplies. On the other hand, suppliers show no willingness in reducing the prices any time soon. One long-term solution could be new construction solutions as to transportation, building structure, and materials. 

What are the alternatives?

One alternative solution that goes hand in hand with another global problem could be the ‘green plan’. There is already an existing problem of an increasing volume of construction waste. A new plan may be to build affordable houses with sustainable materials, thus solving two problems at once, for instance. In this manner, we can overcome the high prices of building blocks and save the environment. 

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