The next wave of the crisis will "cover" construction companies. What are the reasons for the fall in demand for construction, and what will happen next
As expected, a sharp increase in demand for the construction of country houses was replaced by an equally sharp drop in demand. That already gives consequences - another bankruptcy of the "survivors" after the jump in prices of companies.
What are the reasons for the next crisis in the construction sector?
1. The pandemic has provoked a sudden demand for suburban real estate. Land plots and unsold houses were bought up like hot cakes and new projects were ordered. The cost of building materials began to rise. Over the year, most positions have risen in price by 50%, and some - by 100%. The cost of the services of skilled workers has also increased. The wages of bricklayers, roofers, and carpenters have doubled.
2. The rise in prices for construction and real estate did not stop demand, but rather spurred people to have time to buy before the next price hike. Everything started to slow down in September. The rise in prices has practically stopped.
3. Everything slowed down. Pandemic panic and consumer boom have calmed down. There were no more low prices. But the growth also stopped. What then? Then there is a recession. This is exactly the recession that we are seeing now.
4. Customers' revenues have shrunk. Business, air travel, service industries and many other industries suffered losses and went bankrupt during the pandemic. Now potential customers are in no hurry to buy a house or order a project. They compare prices, analyze and make decisions. And the term for making a decision has increased from 1 month to six months.
What to expect next?
- I think that in 2022 we should tune in to a decline in comparison with 2019 by about 30%. It will affect all industries in construction. But different specialists will feel it at different times. For example, geologists and monoliths are already enjoying the decline to the full. Those who build boxes will experience it in March-April. And roofers and finishers - by the end of the construction season.
- In the market, the customer will again become the main one. It is he who will begin to dictate the conditions. But you shouldn't expect a price drop. If it does, it will be insignificant. Customers are already gradually getting used to the available prices and accept them.
- I think the market will recover in 2023-24. Actual inflation will "catch up" with the current price levels, and they will become normal.
- But, alas, not all construction companies will be able to survive this period.