Construction costs soar 23.5% to record highs

Construction costs in residential buildings rose by 23.5% in 2021, compared to the 3.8% decrease registered in 2020, which places the price paid index at 158.77 points, the maximum of the entire historical series.

The crisis in raw materials, the rise in energy and transport costs and the breakdown of supply chains are the main causes of this rise in prices, according to the construction company ACR.

However, and despite the difficulty of making forecasts given the uncertainty of the geopolitical situation and the evolution of the Covid-19 pandemic, it is expected that price stability could arrive after the summer.

On the one hand, energy is expected to return to normal at the end of the first quarter, at the same time that the real estate crisis in China is expected to have a positive influence on the stability of construction costs around the world, all once the demand for the materials decreases.

In the meantime, any drop in costs is ruled out until these dysfunctions completely disappear. “If the international scenario does not get more complicated, we would expect energy prices to normalise at the end of the first quarter and the supply of raw materials in the summer,” says ACR CEO Guillermo Jiménez.

Before the outbreak of the pandemic, prices were already at their highest after more than 13 consecutive quarters on the rise, a trend that the pandemic stopped in its tracks to later increase this growth pattern.

The item that shows the most increases is glassware, with a price increase of close to 50% in 2021. Below are the foundations and the structure of the new works, which act as an advance indicator of the rest of the items, and which mark an increase of 33.9% and 33.5%, respectively. Also noteworthy is the price growth in interior divisions (26.8%) and facades (18.1%). This price level has had an impact on the margin of all the agents involved in the real estate chain, delaying the process of contracting and the start-up of new projects, which are now being carefully analysed looking for optimisation ways that do not affect the final price of the new home.

In this context, ACR considers that the only way to deal with this scenario and try to ensure that prices do not affect the viability and profitability of projects and companies in the sector is to speed up the transformation towards a more industrial construction model.

“In addition to offering unquestionable advantages, such as greater control of costs and project deadlines, industrialised construction is much more respectful of the planet, contemplates higher quality standards and, above all, offers working conditions of safety, stability and comfort that they are much more inclusive and attractive for a sector in which qualified talent is scarce”, concludes Jiménez.