The construction sector still does not see the light at the end of the tunnel. Commodity prices continue to rise and this situation is not expected to change, at least in the short term, nor is there any certainty about when this trend could turn around.
The increases that occur throughout this year will be added to the 23.5% rise registered by direct construction costs in residential buildings in 2021, as reflected in the Direct Construction Costs Index prepared by ACR, which in 2020 reflected a decrease of 3.8%.
These increases can make the price of new construction housing starting this year more expensive, with increases starting at 3% in addition to the natural increase in the market due to the lack of supply and the increase in demand in certain cities.
The general director of ACR, Guillermo Jiménez Michavila, explains that “this increase is directly related to the increase in the price of raw materials, energy and transport and also strongly influenced by the stock out in the supply chains, due to so construction costs are not likely to stabilize until these dysfunctions are corrected.”
The context of uncertainty, fueled by geopolitical tensions and the evolution of the COVID-19 variants, “makes it difficult to anticipate the behavior of prices in the coming months”, indicates the manager, who rules out that there will be drops in the medium term.
“If the international outlook doesn’t get more complicated, we would expect energy prices to normalize at the end of the first quarter and the supply of raw materials in the summer,” says Guillermo Jiménez.
In addition, which will foreseeably lead to a reduction in the demand for basic construction materials, it could positively influence the achievement of the expected scenario of cost stability.
The problem is long
Construction prices were already at record highs before the pandemic. In the fourth quarter of 2019 they chained 13 consecutive quarters of increases. A growing trend that was punctually broken by the health crisis in 2020, which led the Index to register falls that reached 3.8% at the end of that year. However, in 2021, costs not only resumed the upward trend of recent years, but also increased considerably, especially during the second semester.
According to the ACR report, this price level is here to stay and is having an impact on the margin of all the agents involved in the real estate chain, delaying the contracting process and the start-up of new projects, which will be they analyze meticulously looking for ways of optimization that do not affect the final price of the new home.
“The only way to face this scenario and try to ensure that prices do not affect the viability and profitability of the projects and companies in the sector, is to accelerate our transformation towards “, emphasizes the general director of ACR.
Along this path, it is key “to move towards a more collaborative relationship framework, in which all the parties involved work together from the initial phases of project design, a unique moment to promote industrialized construction as well.”
“In addition to offering unquestionable advantages, such as greater control of costs and project deadlines, industrialized construction is much more respectful of the planet, contemplates higher quality standards and, above all, offers safe, stable and comfortable working conditions that they are much more inclusive and attractive for a sector in which qualified talent is scarce”, he explained.
What materials have risen the most?
Direct construction costs closed 2021 with a year-on-year increase of 23.5%, placing the Price Paid Index at 158.77 points, a new all-time high since this series was published.
The item that shows the most increases is glassware, with a price increase that is close to 50% in 2021. Next, are the foundations and structure of the new works, which act as a leading indicator for the rest of the items, and which mark a increase of 33.9% and 33.5%, respectively. Also noteworthy are the price increases in interior divisions (+26.8%) and facades (+18.1%).
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