Future rebuilding costs are increasingly difficult to predict and are being impacted by a broadening cocktail of external events, according to RebuildCostASSESSMENT.com’s Will Molland....
WHEN SUPPLY is low and demand is high, there is only ever one consequence. Prices rise and sometimes they rise a lot! I’m talking in some cases about costs being seven and half times higher than they were 12 months ago.
Take, for example, the cost of importing bathroom equipment from China. Recent reports have revealed how the average cost of shipping a container load of products from the far East has risen from £1,500 to £11,250 in less than a year. Coupled with congestion at UK ports, some building materials and equipment ordered now are being given an anticipated delivery date of August.
This, according to The Builders Merchants Federation, could have an impact on the number of houses capable of being built in the near future. Timber costs are up by a fifth and roofing materials are increasingly in short supply. The whole situation hasn’t been helped by a ‘rush to renovate’ during periods of lockdown either.
Covid, Brexit and all of the current economic uncertainty, means we’re seeing impacts on supply chains, leading to more unpredictability around prices and timescales.
Now you may (or may not) find this all very interesting, but what is the ‘so what?’ here? After all, the House Rebuilding Cost Index for example, which is widely used by insurers to make annual revisions to sums insured, is there to deal with fluctuations in rebuilding cost, isn’t it?
Yes it is, but it is also “based on an average of house types”. BCIS themselves, who produce the index, recommend “that the rebuilding cost is checked regularly”. This is for a very good reason. The fluctuation in the cost of building materials in some areas and for some property types can differ considerably from index-linking, as can the cost of labour.
Factor these variations in and over a period of time, especially during a period of extreme volatility, and underinsurance (or over-insurance) can become significant, even if an assessment has been carried out in the past and index-linking applied.
As uncertainty and volatility continues, professional assessments of rebuilding costs from an insurance perspective are now more essential than they’ve ever been.
Will Molland BSc MCIOB AssocRICS
Arrange an affordable, professional rebuild cost assessment today at www.rebuildcostassessment.com.