Thursday 10th August, 2006

 

Building costs see sharp increase

 
 
 
 
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A merged image of the Ministry of Works and Transport’s official report on inflation in the construction sector.

Private sector construction contractors say heavy traffic on the roads has led to sharp increases in the cost of transporting buildings materials. Photo: KEITH MATTHEWS

BY SANDRA CHOUTHI

The cost of clay blocks has gone up by nearly 200 per cent in the last two years. Hiring a skilled tile layer will cost you 76 per cent more now than it did in 2004.

And if you wanted to rent an excavator in June 2006, you were paying a rate of $627.50, which was exactly 100 per cent more than the $312.50 you would have paid in June 2004.

Some of the price increases in the construction sector in the last two years may sound unbelievable, even shocking. But that’s not the bad news.

The bad news is that in a very recent study the Ministry of Works and Transport suggested that the pace of construction T&T is now undergoing is set to continue for another seven years.

“It is presumed that the level of spending by the State at present is expected to continue for the next seven years or so, and, as a result, we should expect an increasing demand for more materials and services associated with the industry,” stated a 20-page report by the ministry.

The report is titled “The Impact of Inflation on the Construction Sector in T&T from June 2004-June 2006.” It was submitted on July 12 and the title page indicates that it is the work of the Director of Highways in the Highways division of the Ministry of Works and Transport.

After stating that the State’s construction expenditure is expected to continue for the next seven years, what the report says next may be even more depressing for someone looking to build a new house or extend their current dwelling place.

“If nothing is done to reduce the level of inflation being experienced, prices will undoubtedly continue to rise beyond the reach of the ordinary person.”

This is clearly a suggestion that the “ordinary” person can afford current prices for construction equipment, material and labour.

The report makes some noteworthy points, among them:

the “astronomical” increase in the price of clay blocks at 184.6 per cent.

“The mining and other associated materials/resources that goes (sic) into the production of clay blocks has (sic) experienced very little increases to match this inflated price for this period.”

Quoting US Bureau of Labour Statistics, the report said internationally readymix concrete went up by 12.2 per cent, but locally, it went up by 188.5 per cent.

Similarly, building blocks cost nine per cent more in the US, but grade one clay blocks in the T&T market rose by 188.5 per cent.

The report stated that aggregates used in the production of readymix concrete have increased on average by 77 per cent, cement by 17 per cent, rental of heavy equipment by 56 per cent in the last two years.

But it noted that over the same period there had been a 154 per cent increase in the price of readymix concrete.

Dryly, the report commented, “One may be driven to conclude that the reason for this may be a production deficiency in this industry or some other factor relating to a supply/demand imbalance.

“On the other hand, concrete blocks, which consist of the same components as readymix concrete, have risen by 51.5 per cent, approximately 100 per cent less” than the increase in readymix concrete.

The report was compiled over four weeks soliciting information from such sources as Bhagwansingh’s Hardware, Shade Construction Company, Coosal’s Block Caribbean Ltd, Junior Sammy Contractors, Trinidad Cement Ltd and the Central Statistical Office.

During the period studied, the report noted increases in building materials:

— dressed lumber rose 30.7 per cent ($7.33 per square foot in 2004 to $9.58 in 2006)

— structural steel, 65.1 per cent

— cement, 16.73 per cent ($34.49 in 2004 to $40.26 in 2006)

— concrete blocks, 51.5 per cent

Labour rates:

skilled, 71.24 per cent

semi-skilled, 86.69 per cent

unskilled, 34.1 per cent

Daily-rated unskilled labour rates:

a welder, $123 in 2004 to $154.67 in 2006, an increase of 25.70 per cent

a plumber, $134 in 2004 to $200 in 2006, a jump of 49.3 per cent

a tile layer, $134 in 2004 to $200 in 2006, a hike of 49.3 per cent

a carpenter, $123 in 2004 to $144 in 2006, a difference of 17.1 per cent

Commenting on the report, Winston Riley, president of the Joint Consultative Council (JCC), on Tuesday said Government had been opting for fixed price contracts as against contracts that contain fluctuation clauses.

He said a two-year job that would normally cost $200 million would cost $300 million.

“Clients should manage fluctuation risk. Risk allocation and risk management are key to this game,” Riley said. “There has to be new approaches to this system.”

Mikey Joseph, president of the Contractors’ Association, attributed the increased cost of clay blocks to the cost of transport—more traffic, less loads daily—and labour.

Joseph said in his opinion, those two factors were not sufficient to drive the price of clay blocks up by more than 100 per cent.

Regarding the report stating that the world price of steel has been on the decline, but local prices have been rising, Joseph said Mittal Steel Point Lisas had increased the price of billets per tonne by US$5.

Joseph said one had to add to the world price of steel freight cost, adding that volume purchased affects the price one was able to source it at.

Paul Quesnel, president of the T&T Manufacturers’ Association, said trucks now had to line up at quarries for materials to keep pace with the quantity of construction projects underway.

He said some people in the construction sector may be taking advantage of the situation and taking prices up beyond reasonable access.

“Once there is confusion in the marketplace, and things are not running nice and smooth and evenly, it tends to produce the environment for people to take advantage of the situation,” Quesnel said.

Stating that his house insurance is due shortly, Quesnel said he was told by his insurance company that to build a “fairly well put away house” nowadays will cost between $550 and $650 a square foot as compared to $250 a square foot two years ago.

The report describes itself as a “brief study,” which should not be seen as “conclusive” and recommended that further in-depth analysis be conducted by an independent industrial economist to “determine and recommend a course of action to stem this rising inflation.”

 

 

 

 

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