In 7 months: the execution costs jumped by 10% - "an apartment will cost the client another 150 thousand NIS"

Sanitation, aluminum and wages have soared - and the contractors will pass this on to the buyers. Contractors reserve iron at the old price - before it too jumps. The Association of Builders of the Land to the Prime Minister and Minister of Finance: "We owe 50,000 workers within a month"

By: Alexander Katz

May 1st 2024

Most construction products are on the rise. This morning it was announced that Rav Barih is raising the prices of plastic, iron and concrete products by 8%, but conversations in the industry indicate that the increases do not end there, and also include sanitary products, flooring, aluminum and more.

And how much did those suppliers say that the prices are rising?

"I am sitting with suppliers for two new complexes we are building," says the contractor Rafi Zanzuri, who also serves as the chairman of the Netanya Contractors Association, "and they tell me that all the prices are going up - sanitary ware and flooring, some of which comes from Turkey and China."

Between 6% and 10% - depending on the product. Europe is not the prices of Turkey and China. But it doesn't end here either. Aluminum also increases by 8%. I have a proposal from a supplier regarding a complex that we should have started building about two months ago, and it was delayed because there are no workers, and currently the plan is to start construction in October. So the offer from that supplier will be 8% more expensive than the offer I received from him last June."

At least in the field of iron there is still no increase, and we are talking about relatively low prices, but a jump is expected there as well.

"True, the prices are low, but they will rise. I am already going to stock up on iron from a large supplier to maintain a low price level before there is an increase."

In reference to this, about two weeks ago, the CEO of S. Cohen Barzel Metal Works, Mirit Cohen Zamir, assessed in a conversation with the Israel Construction Center news site that "the price of iron in Israel at the moment does not reflect the true cost of iron. When the market opens, it will return to the real price - and the price will rise. The price has been on a downward trend for several months since the outbreak of the war, due to low demand compared to the high supply of iron in Israel, and because we do not have the ability to store all the iron we ordered. It should be taken into account that for several months now the volume of imports has been reduced in accordance with the decrease in demand."

According to her, the price "could go up by NIS 1,000 (per ton) after the war, when we return to normal and the economy returns to normal activity. I estimate that there will be an increase of about 30%. So, dear contractors, my advice - it is important to hedge the effect of price when pricing the projects."

And this is exactly what Zanzuri and many other contractors do, who reserve steel at a low price, after absorbing the increases in all other categories, and of course the cost of wages for the construction workers. "In order to keep our subcontractors who employed Palestinian workers in recent months, the increase in wages is being passed on to us," says Zanzuri. "Labor wages increased by at least 10% in all fields - electrician, finishing works, welding, plastering, paint, skeleton."

Zanzuri also refers to the transportation costs that have skyrocketed due to the attacks by the Houthis on ships in the Red Sea, which obliges them to extend their journey to Israel through the Suez Canal, alongside the insurance of the imported goods that has skyrocketed, and also tells about a new problem that he has noticed: "In Turkey, the suppliers conduct a sort of strike against us It's not that they stop working with us, but suddenly if we need 10,000 toilets, the supplier will say that he can only supply 3,000. This thing creates a shortage."

Try to quantify me with a number - how much did the cost of building an apartment go up in the last few months?

In my zero reports - the execution costs jumped by about 10%. If it costs me about NIS 1 million to build an apartment without land and VAT, then now it's 1.1 million. But it doesn't end there. The extra NIS 100,000, I have to deduct from that the entrepreneurial profit, and add VAT to all of that. So the price of an apartment per customer increased by at least NIS 150,000. And listen, this whole business is very tough. There is no feeling that the state is trying to solve the problems."

Demand: 50 thousand foreign construction workers within a month

And in connection with this, the Association of Contractors Boni Ha'aretz today sent a letter to Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich, in what appears to be a threat to "take off the gloves". "The delay in delivering apartments and public infrastructure that the government created is already six to eight months and the industry is on its way to a spike in apartment prices, the collapse of companies, the layoff of tens of thousands of Israelis and a loss of tens of billions of shekels to the state treasury - while it is planning a dramatic tax increase," wrote the president of the association, Raul knitted.

For the original Hebrew article click here