A surge in the cost of building materials is alarming the industry, reports the SA Builder, the journal of the Building Industries Federation (Bifsa).

The magazine says in its June issue that it is a bone of contention among contractors and builders whether the rise is due to a perception or a real statistic.

Following a recent amendment to the indices, materials price changes are now calculated at consumer level. Bifsa funded the amendment, and believes the industry will benefit from the indices being far more reflective of real price adjustments.

Elsie Snyman from Industry Insight is quoted as saying the cost of building is affected mainly by the cost of labour and the cost of building materials. On average, building materials constitute a larger portion of building costs between 55% and 60%.

The use of an index that accommodates both materials and labour is preferable, she says.

SA Builder reports that price trends in the industry often over-shoot inflationary trends. During recessionary periods, costs are more stable, due to a lack of demand, but in boom times, prices of building materials and labour increase more rapidly as manufacturers and suppliers try to restore depleted profit margins and recapitalise.

Although contractors benefit from increased building activity, they claim that their profit margins generally remain below 5%.

"Very few contracts these days provide for increased cost recovery," said Farid Hartnick, commercial director of Stocks Building Africa.

"Most of the tenders are awarded on a fixed-price basis, leaving the escalation risk with the contractor rather than the client.

"For example, the supply of clay stock bricks was quoted at R268 per thousand in October 2000. Nine months later the price had jumped to R460 per thousand. There is no way that one could have envisaged or even allowed for such an increase. This, of course, not only applies to bricks, but to a range of building supplies across the board," Hartnick said.