Amid a massive rebound in housing starts, builders in the United Kingdom are having trouble sourcing brick supplies, with demand so strong some suppliers have reportedly stopped taking orders.
With home building levels expected to rise further, the situation is unlikely to improve anytime soon, though demand is sufficiently strong that builders will most likely be able to pass on significant portions of any price increase to their customers.
In its latest report, US based design, engineering and construction outfit AECOM said brick supplies had been one of the most significant sectors impacted by a surge in residential construction starts within the United Kingdom, where a surge in demand was feeding through into longer procurement lead times, challenges in securing labour and supplies, and higher wages and materials costs.
Depending on location, brick prices were up between 10 and 20 per cent year-on-year, AECOM said, even as weaker conditions in commercial building and a strong currency mean overall construction material costs are virtually stagnant.
Wage rates for bricklayers and joiners, meanwhile, are up 10 per cent over the past year even as pay rates are stagnant or declining for some types of tradespeople who are more exposed to the weaker commercial sector, such as plumbers and shopfitters.
Indeed, the current level of demand means some suppliers have taken the extreme step of refusing to take new orders, while some smaller builders are reporting difficulties in securing supply.
Though such developments are concerning for builders, they are a welcome reprieve for brick suppliers (and bricklayers), who, having previously suffered years of weak demand, plant closures and layoffs are now scrambling to reopen mothballed plants and boost output.
The rebound in the brick industry is being driven by a massive recovery in new housing construction, which in turn has been driven by low interest rates and the government’s ‘Help to Buy’ scheme. That scheme has enabled prospective home owners to purchase property with deposits of only a five per cent.
In the year to March, housing starts around the country shot up by 31 per cent, the most recent Department of Communities and Local Government figures say.
The recovery is widely tipped to continue. New forecasts from the Construction Products Association, for example, suggest private housing starts will grow by a further 18 per cent in 2014 and 10 per cent in 2015. Encouragingly, some sectors of the previously weaker office and infrastructure markets are also expected to return to significant levels of growth.
Partly because of this, AECOM says it expects upward pressure on tender prices.
Over the next 12 months (second quarter 2014 to second quarter 2015), it expects tender prices to rise by between 3.5 per cent and 5.5 per cent.
The year after, it says, prices will rise by between 3.5 per cent and 7.5 per cent.