My wife really wants to build a patio for the summer. Our neighbours are encouraging us to start the project now, arguing that due to inflation, the longer we wait the more expensive the renovation will become. That's a statement I generally agree with — but not necessarily in this case.
The demand for construction materials in 2020 surged largely on the backs of DIY renovators, but now the developers are back in the game, resulting in even more demand. They delayed construction projects last year and are now making up for lost time, purchasing large quantities of building supplies.
On the supply side, it isn't "business as usual." The forestry industry has been affected by COVID-19 with some mills shutting down and others, due to physical distancing rules, functioning with a skeleton crew, hindering production. The high demand combined with low supply of materials has caused prices to increase dramatically.
In early 2020 I was buying two-by-fours for approximately $2.50 each, whereas today the cost is closer to $12. That said, I don't believe that prices will remain this high forever. Whenever there is a price surge in a commodity such as lumber, suppliers ramp up production to take advantage of the higher prices.
For the past year this wasn't possible due to the pandemic. Now that we have vaccines, mills on both sides of the border should soon be fully staffed and working overtime. As more product hits the market, prices should even out and then fall. When and by how much depends on the demand and how soon our supply chains normalize.
Our supply chain is reliant on globalization. Various parts of a product come from all over the world — for example, China, Europe and South America — which are then assembled and sold. If there is a disruption in any one of these supply chains and a manufacturer is missing that last widget, production stops and items are not available for sale.
The world is currently awash with supply chain issues which will dissipate in time, but until that happens, expect to pay a premium and see lower supplies of high-demand items such as cars, bikes, technology, appliances, building supplies — even pets.
Ultimately, we have decided to build the patio as I feel it can be done without breaking the bank and, as they say, "happy wife — happy life."
Following are my tips on how to remain within your renovation budget:
Be open to substitutes. For example, composite materials, which are more durable, easier to clean and typically more expensive than wood, are now a better value. I will be using these for my project. It also pays to be flexible — in the past, when shopping for flooring materials, I saved 40 per cent simply by choosing a different colour.
Try to cut down on labour cost. Labour is typically 40-50 per cent of a renovation budget, however, with the help of my neighbour and YouTube videos, I'm hoping to keep costs down by building the patio myself. Some projects you can easily complete on your own (flooring, painting, drywall), while others you will need to bring in professionals. From a budgeting perspective, the more you can do yourself, the better.
Find discounted construction materials in the secondary market. By browsing Craigslist or Facebook Marketplace, you can often find quality and often new materials. I recently picked up a gently used but energy-efficient window for $400 which retails for $1,000. Often these items originate from another renovation site where the contractor is willing to offload excess materials cheaply to keep the usable product out of the landfill and off their job site.
While I have decided to move ahead with my small patio renovation, if I were contemplating a larger renovation such as an extension on a house, I would, if possible, delay the renovation until the price of construction materials normalized. It will take some time but eventually the pent-up building demand and the supply chain issues will work themselves out.
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ABOUT THE AUTHOR
Mark Ting is a partner with Foundation Wealth, where he helps clients reach their financial goals. He can also be heard every Thursday at 4:50 p.m. on CBC radio as On the Coast's guide to personal finance. @MarkTingCFP email@example.com