There is a shortage of building materials due to the boom; prices are also rising

Prague - Construction companies across the country are feeling the shortage of building materials. The market is particularly lacking in insulation materials, and there are also difficulties with the supply of steel and bricks. Those interested are waiting for the fulfillment of their orders for several months, and the high demand for building materials is driving up their prices. The reason is the construction boom and uncertainty regarding the increase of value-added tax on residential construction. Smaller companies are particularly affected, while construction giants usually secure building materials in larger quantities in advance.
    The construction company Metrostav has long been struggling with a shortage of building materials, but it manages to cope. According to spokesman František Polák, the worst situation is with insulation material, specifically mineral wool. “However, Metrostav has long-term contracts, so it never finds itself in a situation where it lacks any material, as it orders in large quantities,” he added.
    Material manufacturers confirm that they are barely keeping up with production. For example, the producer of bricks, ceilings, and lintels, Heluz The Brick Industry, which is among the three largest Czech manufacturers of fired masonry materials, is now accepting orders for delivery only after August 15.
    Increased demand for building materials is also noted by the manufacturer of cement-bonded particle boards, Cidem Hranice. According to Martin Kovač, the division director at Cetris of Cidem, customers are currently waiting for deliveries for more than a month. “In recent years, we had basic goods in stock,” Kovač stated.
    “It is true that due to the high demand for building materials recently, there are occasionally short-term reductions in stock levels to a minimum,” said Petr Kočí from the Bauhaus retail chain. Recently, this applied to mineral insulation, for example, Rockwool. According to him, the demand for building materials has recently risen by tens of percent.
    Marketing manager of Rockwool, Dana Hochmannová, stated that a similar situation as in the Czech Republic is occurring in most European markets. People want to invest more in insulation due to the rising energy prices and are additionally demanding thicker layers of insulation than before. “We had to increase prices because energy, oil, and indeed all the materials we need for production have become more expensive,” Hochmannová said.
    Exceptionally favorable weather conditions during this winter allowed builders to carry out all construction work without restrictions. In the first quarter of this year, total construction output increased by 28.9 percent year-on-year. As a result, manufacturers' warehouses were quickly emptied. Many of them are also exporting their products. “Manufacturers often prefer to export their products abroad, where they receive a better price,” said Luboš Turek, managing director of the company Staviva Impuls in Chomutov.
    The growth of construction was also influenced by the uncertainty regarding the increase of value-added tax on residential construction. These constructions could still be subject to a lower five percent rate for the next three years, as the European Commission is likely to extend the Czech Republic's exemption until 2010. Extending the exemption for the construction of apartments and houses would avert the price increase that was expected at the beginning of next year. For example, new family houses were supposed to become hundreds of thousands or even millions of crowns more expensive. The exemption was supposed to apply only to social housing.
    However, the government, as part of public finance reform, wants to raise the reduced rate from five to nine percent, which is likely to increase the costs of residential construction anyway.