Massive price hikes in insulation products are driving up the cost of building and threatening uptake in the Government’s €8bn home retrofitting scheme.
Trade suppliers already believe that construction material price rises have brought many one-off housing projects to a halt, with the rising price of already-expensive insulation a major factor, according to construction material suppliers spoken to by the Sunday Independent.
One large UK-based insulation supplier last week notified Irish distributors of a 35pc price hike, just the latest huge increase to hit the market.
Other insulation suppliers have also flagged a wave of new price rises from the beginning of April, with more price hikes expected at the beginning of May.
The current round of price hikes follows on from significant price rises on insulation products already this year.
“I have just had a 35pc price hike from one large insulation supplier land on my desk today,” said Paul Candon, CEO of United Hardware Limited, which operates the Homevalue retail chain.
“There used to be murder if we put a 3pc price increase on a product – but now the market is growing accustomed to much bigger rises, like 8pc to 12pc on timber in the last two weeks, and 10pc to 15pc on steel. There is almost a bidding war going on around steel because it’s in such short supply.”
Candon said he is now starting to see an impact on trade and is very concerned that tradespeople are taking a hit.
“Maybe it was the double bank holiday, but it’s definitely quieter. Things have slowed down over the last few weeks, despite a very good January and February.
“Things had just started getting a bit better and prices were beginning to go down. I had actually factored price deflation into our budget for the second half of the year. But now all I’m seeing is price inflation,” he said.
Construction experts told the Sunday Independent that the rising cost of insulation could push up the cost of building an average house by as much as 20pc.
The owner of a well-known rural building suppliers said he was also seeing rapid insulation inflation.
“There’s a huge raft of inflation coming down the line for insulation, and it’s linked with oil and global demand.
“For the main three or four suppliers of insulation, which cover about 80pc of the market, we are being told of price rises coming for the first week in April that average 13pc, with a similar increase following in May. And that’s on top of a number of 10pc price rises – and there is more on top of that besides.”
This level of increase was going to cause major problems for the Government’s home retrofitting plan, which has a target of providing significant grant aid towards deep retrofitting of 75,000 homes per year by 2026, he said.
“The workings of that plan were already difficult, not least for homeowners to find a registered person to do the work for them. We are not seeing the retrofitting programme gaining any traction at all, and these price rises are going to make it very difficult to get the money together for the houses that most badly need new insulation,” he said.
The Sustainable Energy Authority of Ireland (SEAI), which operates the government retrofitting scheme, said it was “mindful of price increases in the sector over the last six to 12 months, and has obtained a number of independent cost reviews over the period to help inform our scheme design.”
It said that it had “taken account of these recent cost increases in setting the grant levels for the newly launched One Stop Shop, and other residential grant schemes increases within SEAI.”
The spokeswoman continued: “Cost estimates for the overall residential upgrade plan by McKinsey had a built-in inflation rate of 7pc per annum. The current cost-increase levels may be higher than that, but both SEAI and the wider market expects that this will balance out over the 10-year period to 2030, across which EU and national targets are set.”
Asked would SEAI consider increasing the amount of grant aid available to counteract the huge cost rise, she said SEAI had “taken into account” recent increases in costs when setting the newly announced grant levels.
“However we will keep this and other factors under review, to ensure that our programmes meet government objectives and targets.”
Another major impact from the rapid rise in construction material costs has been a stalling of many one-off house building projects in rural Ireland, said the rural hardware supplier.
“Usually when there are price rises coming we see a bit of panic amongst the builders, because they want to stock up before they hit. But we’re seeing none of that this time around. We’ve finally reached a point where builders of one-off houses have come to a stop. They cannot budget any more because banks will not give them any more.”