RISING raw material prices and higher wages are making it more expensive to build houses in Yorkshire, a developer operating in Huddersfield has warned.
Cala Finance, part of the Cala Group which is transforming the former Hopkinsons’ site at Birkby with its Hexagon residential scheme, said housing construction soared by 8.75% in the past 12 months and was likely to continue rising this year.
It said the average cost of construction in Yorkshire had now risen by 28.5% since 2003.
David Whittaker, managing director of Cala Finance (Yorkshire) warned that increased costs would make it harder for developers to make new homes “affordable”.
He said: “This is a situation that is unlikely to change in the foreseeable future, especially with the Government implementing stringent targets on the use of sustainable and eco-friendly materials which are still relatively expensive.
“The situation is particularly acute for residential developers who employ main contractors, rather than those which retain their own workforce.”
Mr Whittaker continued: “In the current climate there also appear to be fewer main contractors willing to take on housebuilding jobs. As a result, there has been a significant increase in their tender prices – even upwards of 10%.”
Cala Finance – which provides funding for residential developers – said the hefty increase in costs was due to increased materials prices and higher wages, driven by a shortage of labour in the face of an increased number of larger construction projects.
Raw material prices rose by about 3% in the first half of 2007 following a 10% hike the previous year. Timber prices were particularly affected – up by 15% – while annual wage rises in the industry had been as high as 6%.
Mr Whittaker said most of the residential developers using Cala Finance for funding employed their own workers or had built up a team of regular and reliable sub-contractors.
He added: “As they tend to be smaller and medium-sized companies, they are also able to move much faster than the large public limited companies when it comes to acquiring sites, gaining planning permission and building.
“The quicker the process of getting their new houses to market, the more likely the costings are to be correct, and the quicker the cash starts to flow.”
Mr Whittaker said new houses would have to be built at a rate of 240,000 a year to achieve the Government’s target of 3m new homes by 2020.
Finding the land and getting planning permission would remain difficult, he added.