The cost of materials in residential construction has increased by 27.3%
By Mas Property
on Tue Dec 20 2022
The cost of materials in residential building activity has increased by 27.3% since the start of the pandemic (March 2020) until last August, the latest data available, according to the Ministry ‘s construction materials index of Transport . This figure (27.3%) refers to residential construction and excludes rehabilitation, non-residential construction and civil engineering works. If all these areas were taken into account in aggregate, that is, construction activity in a broad sense, the increase in material costs compared to March 2020 would be 33.8%, six and a half points more.
Just a year ago we did this same exercise. And the balance at that time indicated that the increase in construction costs in residential construction since the start of the pandemic was 8.4%. One year and two months later, the gap compared to March 2020 has risen to 27.3%, that is, it has tripled.
It should be clarified that these data from the Ministry on the cost of materials include energy consumption. The current situation suggests that it is the energy prices and not the interruptions in the supply chains that are most affecting this inflation in the costs of materials. Let’s remember in the first months after the pandemic it was the shortage of supply and logistics that mainly made the raw material more expensive. Little by little, distribution has been channeled, demand from a large consumer of materials such as China has also fallen, but, as a counterforce, energy inflation has intensified.
In this situation we find good news: the trend has begun to change. Construction costs were on the rise until last May, when they peaked. At that time, the increase compared to the start of the pandemic was 28.3%, that is, one percentage point more than currently. From then on the trend has been downward; The pressure is easing, although they are still at very high levels never seen if one looks at the historical series since 2005.
In May 2022, when the cost index of materials in residential construction reached its maximum, with 133.5 points (with the base being 100 in the year 2015), the growth rate in the last year was 25.1 %. In August of this year, the latest data available in the statistics, the interannual increase had moderated to 16%, remaining practically flat compared to July and after two months of slight falls in the monthly rate. So despite this striking increase of 27.3% accumulated in the cost of construction materials in residential construction since the start of the pandemic, we are seeing good news in terms of the pressure that construction costs can exert towards a increase in the cost of new construction housing. Seems like that pressure is starting to ease.
Source: Tinsa, November 2022