The construction industry and its segment – prefabricated buildings or halls – is one of the sectors that are greatly influenced by natural economic cycles. A classic phenomenon within these cycles is the alternation of recession and boom. Other significant factors that affect the construction industry and, in fact, influence these cycles are natural disasters or wars.
One of the most significant booms that the Czech Republic has ever experienced was during the period 2017–2020. It was the year 2020 and the onset of Covid in the Czech Republic that completely paralyzed the economy not only in our open economy, but worldwide. The construction industry reacts with a slight delay, and those who built in 2020 did so at the lowest possible prices and with cheap money, because warehouses were full of materials, production was being reduced, and with that, prices were falling as well, since there was less investment and many investors were waiting to see what Covid would do to the economy.
The economic situation was not as bad as economists’ predictions, and demand slowly began to grow. Investors decided to invest their own or bank money into previously prepared projects due to low interest rates ranging from 0.5–2.9% p.a. The economy began to recover, but unfortunately, the closed and reduced production worldwide was unable to respond flexibly to the growing demand.
Examples of price levels for some commodities:
| Material | 2Q 2020 | 3Q 2021 | 2Q 2022 |
|---|---|---|---|
| Tr sheet 160/250/0.75 | 245 CZK/m2 | 599 CZK/m2 | 688 CZK/m2 |
| KINGSPAN panel thickness 100mm TL | 621 CZK/m2 | 890 CZK/m2 | 1120 CZK/m2 |
| Combiroof insulation 200mm | 224 CZK/m2 | 510 CZK/m2 | 715 CZK/m2 |
| Steel material HEA 200 | 16 CZK/kg | 26 CZK/kg | 43 CZK/kg |
For these reasons, from February to June 2021, material prices in construction rose by up to 100% in some cases. The worst hit were stainless sheets, which increased by more than 100%, steel material rose by 60%, insulation by 130%, etc. After the stabilization of supply and demand in the second half of 2021, the construction industry and our sector of prefabricated halls faced another blow, namely the war in Ukraine. Prices began to skyrocket again from the end of February 2022, especially for commodities related to wood, oil, gas, and metals that are mined or imported from Ukraine or Russia. The result is huge inflation of over 10%, associated with an increase in CNB interest rates above 5%, which commercial banks reflect in loans. All this will gradually lead to a reduction in investment, and if the war in the east does not end soon, the construction industry is not facing easy times. The only salvation are investors who invested at the beginning of Covid and now have good creditworthiness. They can help the economy and themselves preserve the value of their savings.
It won’t get cheaper, it will only get more expensive, and the best way to store the value of money is in real estate. Among these are products that we can build, such as warehouses, car showrooms, production halls, stables, car washes or other buildings with a lifespan of more than 30 years, which will survive more than one economic cycle with their value preserved.
Fig. 1 Kingspan panel
Fig. 2 Combiroof Isover composition
Fig. 3 Load-bearing Tr sheet CB 160/250/0.75
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