With 66,000 housing units now under construction, production in the home building sector has returned to its 2008 peak, according to a report published by ING on Friday.
The financial services group expects this to continue but at a slightly lower level than in recent years as shortages of both material and staff affect production. There is also a shortage of building sites and planning capacity, ING noted.
Building permits are difficult to obtain. And because of sharply higher demand for building materials, costs are escalating. Many current projects were planned during periods when there was little pressure on costs of building materials.
The cost of construction materials is now 7.5% higher and this could stretch to 10% because of the uncertainties in the trade, industry building costs data centre BDB is projecting.
The construction industry’s order books are filled on average for 10 months. Margins are indeed not high, but remain at the same level, said ING economist Maurice van Sante.
Only 7% of building firms expect to book lower profits in the current quarter than they did in the first three months of 2018. Some builders have managed to renegotiate contracts to absorb the increased costs, Van Sante said.
ING said the low number of sector bankruptcies indicate higher purchasing costs have not affected earnings. Meanwhile, labour productivity has increased by more than 20% in the period between 2014 and 2017.