Navigating a renovation project whilst construction costs are high.
If over the last two years you have contemplated undertaking a renovation project, you will be fully aware of the dramatic shifts experienced within the construction market. Unfortunately, there is no avoiding the reality that construction costs are higher right now. In this article we provide a brief overview explaining why quotes being issued by construction companies in Europe are exceeding expectations. And more importantly, we will be sharing tips on how to effectively navigate your way around these issues in a way that helps to ensure your renovation stays within budget.
Construction Cost Increases: What, Why and How to Overcome them?
What? The costs in question
As indicated by graph 1, there has been a considerable increase in the price of construction materials. This has put construction company’s profit margins under pressure. In response to this, contractor prices have also been forced to rise to defend this margin, see graph 2.
Why? 3 key reasons
- Inflation: As of now, the eurozone’s headline inflation rate is running at 5 percent. As supply gradually catches up with demand over the course of 2022, inflation is predicted to go down, but currently products like construction materials are particularly expensive.2
- Supply Chain Disruptions: Construction material inventories in Europe are at a record low. Over the course of the pandemic, manufacturing of essential materials all over the world came to a grinding halt. Suppliers must improve their inventories before price decreases can be considered.
- High Demand: These supply chain disruptions are accompanied by high demand in the construction sector. Not only are there severely back-logged projects that were disrupted by the pandemic but also high demand for new construction projects. This is arguably a consequence of people having saved throughout lockdowns and/or those who wish to prioritise the quality of their home environment with the advent of remote work.
How? 5 tips for overcoming the issue
- Don’t Delay: Although this may sound counterintuitive, and it may seem like the most obvious choice is to simply wait until construction prices go down, there is no guarantee when this will happen. Contractors are likely to maintain, if not continue to raise their prices. High demand right now may also mean your project is pushed much further than you would anticipate and eventually at a higher cost.
- Plan Ahead: With this demand in the construction sector in mind, it is advisable to plan ahead. If you have time and do not need to start construction right away, make sure you still engage contractors as soon as possible, and then plan with them to start in a few months. When you can adjust your timeline to their pipeline, this can help with the costs. If you need your work prioritise, they are likely to charge for the urgent work.
- Prioritise: As construction prices are high, it may be a beneficial solution to use a contractor for only the most essential parts of your project. A contractor is usually necessary for significant interventions like breaking walls, but surface level actions like painting and decorating for example, you could perhaps delay to a more convenient time or, better yet, try doing it yourself!
- Be Selective: Opt for materials and features in the design of your project with the highest-cost benefit. This is particularly relevant now as certain materials are far more expensive than others. Take the time to consider what is most essential to you in the project and what parts of the design you are willing to adapt and be flexible with for the sake of cost.
- Professional advice: Having the input of an architect can significantly increase the tangible financial benefit of the tips mentioned above – planning, prioritisation and selectivity. Architects help you do more with less. Professional experience promises creative and cost-effective design solutions you would not have considered, for example sourcing a less-expensive material alternative which achieves the same desired effect. Industry connections to suppliers and contractors also potentially mean they can negotiate discounts on your behalf.
It may initially seem counterintuitive when discussing ways to curve construction costs to propose piling on the additional expense of hiring an architect. However the benefits of having a highly experienced professional on board your project, who are familiar with the ins and out of the construction process and of the industry itself, arguably do outweigh the costs. From avoiding potentially costly mistakes to the selection of cost-effective materials, architects guarantee your vision is achieved and eliminate unessential spending. Our previous article may help you answer the question: Do I Really Need An Architect? Note the AKKA Architects case study which demonstrates how a client was saved €14,750 through acquiring major furniture discounts.
It is understandable if you feel discouraged about pursuing a renovation project right now because of the challenging state of the construction industry. The process towards recovery may well be long and unpredictable. However, the truth is that waiting will not necessarily guarantee costs will improve. If you are hoping to renovate or undertake a new build in the near future, it is advisable to approach the project head on. Make sure you have all the necessary knowledge about new developments in the industry and an experienced team to help you make innovative and financially smart design choices.
If you need advice on navigating construction costs or are considering hiring an architect for a future renovation project, get in touch with us. We would be happy to help with any questions you may have.