Russian sanctions and Ukrainians returning home to fight have led to a shortage of construction materials and labor in Estonia since the war in Ukraine started two weeks ago.
While some materials are no longer available others have become much more expensive. This has raised the costs of construction projects significantly and will lead to a reduction in building this year.
"Construction metal has risen in price by 20 and 30 percent, and that is only today, a week or two after prices went up and sanctions were imposed," said Ivo Volkov, Chairman of the Management Board of Merko Estonia.
"The situation is similar with wood, and all the raw materials from Belarus, Russia and Ukraine are still in question today," he said, adding prices will continue to rise.
Chairman of the Management Board of Nordecon Gerd Müller said prices have risen to an unreasonable level.
"If it's really needed today, the material will probably be found somewhere, at an absolutely extraordinary price," he said. It is likely new supply chains will be created in the coming months.
Müller said Ukrainian construction workers returning home is a smaller problem, but it will lead to an increase in labor costs.
"Nor can they all be replaced, its impact today is certainly smaller at a time when the materials market is ... I would even say panicking," he said.
The combined effect of these two problems means less building work will be carried out in Estonia this year, said head of the Association of Construction Entrepreneurs Indrek Peterson. He estimated there would be a 10 percent drop in construction volume.
"Entrepreneurs still have jobs today, with three months, with six months left to go. At present, it is difficult to predict what will happen with new projects, as both the customers and the entrepreneurs themselves are anxious," said Peterson, adding new projects may now come with greater risks attached.
Editor: Helen Wright