Survey of building suppliers reveals staggering inflation

Just as the Commerce Commission’s building sector probe begins, 28 per cent price rises in products for residential and commercial work are being clocked.

The EBOSS Q4 construction supply chain update found 16 per cent rises in the past three months.

But participants forecast a further 12 per cent rise in the next half-year, resulting in a compound 28 per cent.

On November 22, the Commerce Commission said it was undertaking a market study of factors that may affect competition for the supply or acquisition of key building supplies used to build the major components of residential buildings: foundation, flooring, roof, walls (structural and non-structural, interior and exterior) and insulation.

A draft report is due next July and a final report next December.

The EBOSS survey questioned 219 suppliers in major residential and commercial construction product categories about logistics, prices, transport, shipping, operating in a global market and lead times.

“Following a higher than anticipated 16 per cent increase in material costs over the last three months, building suppliers are estimating a further 12 per cent increase in the cost of their materials over the next six months,” the survey found.

Matthew Duder, EBOSS managing director, said the future cost of materials was unknown.

“Builders have an increasingly difficult job when it comes to pricing build contracts.”

Many suppliers think architects and builders are taking on unsustainable amounts of work.

The number of dwelling consents in New Zealand is at an all-time high, with BRANZ forecasting new residential building consents to stay at record levels of more than 40,000 new homes for the next four years.

The survey found 82 per cent of suppliers are having problems keeping pace with the market, 83 per cent say freight is a key problem, 98 per cent say the cost to buy materials from overseas has increased in the past six months

Increased global demand for building products is hurting them, 87 per cent have increased costs in the last six months. Only 13 per cent report that they haven’t made any changes to costs but 83 per cent expect further cost rises in the next six months.

Around 93 per cent aren’t confident they’ll be able to pass on the full cost of increases.

Freight issues including increased shipping costs, worldwide shipping issues and delays at ports here were hurting suppliers.

“The number of suppliers experiencing freight issues is still in the majority,” Duder said.

“Due to the reduction in direct lines out of China and Europe to New Zealand, there’s an increased reliance on Australian ports to get products into New Zealand, so we’re heavily reliant on the effectiveness of Sydney, Brisbane and Melbourne ports,” he said.

The report identified the main local ports the industry here relies upon and measures lead times for different building product categories.

Products from structure and enclosure categories have long lead times of 10 weeks and 11 weeks on average. A significant number of suppliers in these categories need at least 24 weeks’ notice for product ordering.

EBOSS said 90 per cent of suppliers were selling imported products or products containing imported components not easily replaced by domestic supply, meaning substitutions for NZ-manufactured products are unlikely to significantly ease the situation.

“The sentiment from two-thirds of suppliers is that they’ve got very little ability to impact lead times. They’re trying to do the best they can, but often they’re dealing with forces far greater than they can influence,” Duder said.

Yesterday, the Herald reported on major building product supplier Carters writing to customers advising that within the next three months, they’ll have to pay more for many items.

One manufacturers’ silicone sealant product price will rise 27.5 per cent from February 1, Carters said.

The letter from Carters national support office on Harris Rd, East Tamaki, named many products and the exact price increases planned.

Timber, fastening systems, polycarbonate roofing, building wraps, underlay, laminated goods and door hardware products are all listed by the national supplier as products that will soon cost more.

“As a supply partner in your business, we wish to give you prior notification of upcoming market-wide price movements affecting various suppliers,” Carters wrote.

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