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Construction costs soar 10% in six months

By Mas Property

on Wed Aug 04 2021

Construction costs in residential buildings rose 7.7% year-on-year until June. Thus, in just six months, prices have shot up 9.6%, as reflected in the Direct Construction Cost Index prepared by ACR. Thus, the Paid Price Index stood at 140.85 points, exceeding the maximum value reached since this series was published, which was recorded in the fourth quarter of 2019, with 133.63 points.

“The increases registered in the last six months are attributable, to a large extent, to the rise in prices of raw materials such as steel, wood, aluminum or copper. There are still no significant increases in the cost of the hand of construction, which was the main cause of the constant increase in construction costs in recent years “, according to Guillermo Jiménez, general director of ACR.

Construction prices were already hitting all-time highs in the fourth quarter of 2019, after chaining increases for 13 consecutive quarters . This growing trend was broken in a timely manner with the health crisis in 2020, which led the index to register drops of 1.7% and 3.8% in the third and fourth quarters of last year, respectively. However, in 2021, not only has the upward trend of recent years resumed, but it has also increased.

Costs rise 7.7% year-on-year in June

In any case, “it is difficult to anticipate what the behavior of prices will be in the coming months and whether or not it will have an impact on companies in the sector that, given the uncertainty of the last year, may have assumed certain risks to ensure their level of activity. “, indicates Jiménez.

“In our opinion, the criterion of prudence should guide all the decisions taken at this time by each of the actors that are part of the production chain, since we are a key sector in the economic recovery of this country”, underlines the General Director of ACR, who adds that “we are convinced that collaboration between all parties, in its most radical sense, is the only way so that this upward trend does not affect the viability and profitability of the projects.”

Structure costs, 17%

The items that suffered the most increases are the costs of foundations and structure of the new works, which act as a leading indicator of the rest of the items, and which show an increase of 13.4% and 17%, respectively . Other price increases in wood carpentry (7.1%) and glassware (10.4%) also stand out. Only the item of earthworks registered a year-on-year decrease of 1.8%.

Source: El Economista, June 2021

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