The prices of construction materials are becoming an increasing challenge for investors. New technologies are emerging as a solution.
According to data from the Central Statistical Office, the prices of construction and assembly production in January of this year were 8.3% higher than in the same month a year earlier. This suggests that we are close to record increases, comparable to the period just before the 2008 financial crisis when the national construction market (primarily residential) was overheated. Monthly data from the Central Statistical Office on the growth of prices are even more interesting. In just 31 days, from January of this year to December of the previous year, the cost of construction and assembly production increased by 1.1%. This is another record – for example, in 2020, the average monthly price increase ranged from 0.2% to 0.3%.
Prices of construction materials alone are rising even faster. According to data from the PSB Group, they were 28% higher in January of this year than a year ago. However, these data do not fully capture the challenges facing investors. While some product categories – such as cement, lime, paints, or varnishes – increased by roughly the overall inflation rate, the prices of others rose much more dynamically. The record of recent quarters is, of course, the prices of thermal insulation, which increased by almost 70% year-on-year – significantly more than would be expected from the rise in the price of crude oil, the main component of most insulation solutions used in Poland. Significant price increases, over 50%, are also noted by investors acquiring OSB boards and drywall, while walls have risen by over one-fourth.
Unfortunately, the coming quarters do not herald a reduction in the pace of inflation in the construction materials market. Deepening political tensions, including the increasingly real risk of the military conflict spreading to further areas of Eastern Europe, may lead to a significant reduction in the supply of crude oil and natural gas in the European Union. This will inevitably result in further – this time much more significant than in 2021 – increases in energy carrier prices. It is also uncertain whether supply chains will be fully rebuilt this year. The uncertain situation in the logistics market is a challenge not only for European and American recipients but also for Asian producers of materials and semi-finished products. Therefore, many of them prefer to take advantage of the local boom in construction in this part of the world, settling for a slightly smaller but certain margin.
Great politics and global macroeconomic trends therefore have a real impact on the possibility of implementing residential investments within the assumed budget and schedule. Individual investors, who typically carry out single-family or recreational homes for their own needs, face particularly great challenges. Unlike professional developers and general contractors, they have very limited options for protection against rising prices.
