GUEST ARTICLE: Building material costs continue to drop as housebuilding declines

The cost of key construction materials, such as steel and bricks, is set to significantly drop, largely due to the continued decline in housebuilding, according to a new report discussed in this guest article…

While prices for certain materials remain much higher than recorded in 2021 and 2022, further reductions in costs are predicted this year in line with easing production costs and weaker demand in the housebuilding industry. 

The UK Country Commodity Report, released on 22nd August, has revealed a 2.4% drop in steel rebar prices in Q2, and given the continued expected decline in residential buildings construction, this is set to contribute to further downward pressure on steel prices, and other metals.

Other materials set for a price decrease include welded mesh, bricks, cement and concrete, which are all set to fall due to weaker demand. Having risen sharply since early 2022, prices for cement have now started to fall. Concrete prices did see a rise of 7.9% in Q2 but are now predicted to fall in the coming quarters.

Early August Flash PMI data, used to assess the health of a country’s manufacturing sector, shows the UK is facing a steep economic downturn. It showed a reduction in orders for goods and services during early August, following on from the cost-of-living crisis and general economic concerns, as well as higher interest rates and export losses.

Positive outcome

A positive outcome for consumers is that weaker demand is leading to lower selling prices of materials and services, which are set to continue to reduce in the coming quarters. The UK’s top metal supplier, metals4U, has passed cost reductions on many metals to its customers.

Paul McFadyen, the CEO of metals4U, comments: “Continued higher interest rates and the cost of living is having a big impact on homebuyers and owners, as well as across the trade industry.  Housebuilding is continuing to take a hit, which has repercussions for those working across the building trades, as well as suppliers.

“The price of key materials, such as steel, wood and bricks, is still elevated, due to the impact of high energy costs, increased demand and shorter supply.

“However, commodity prices are now falling and are set to drop further in the coming months, with the decline in housebuilding a big factor. This means we are able to reduce our prices and pass on these savings to our customers and will continue to do so where possible.”

Tim Moore, S&P Market Intelligence economics director, says the dramatic fall in housebuilding was a big concern: “Lower volumes of housing activity have been recorded in each month since December 2022, with construction companies widely reporting subdued sales due to rising interest rates and worries about the economic outlook.”

John Glen, CIPS chief economist, adds: “With yet another fall in residential building levels – for the eighth month in a row – it’s obvious that UK interest rate rises and cost of living pressures have dealt a hammer blow to the housing sector.”