Construction costs could grow by 6.6% this year

Construction costs in 2021 compared to 2020 could increase by a record high of 6.6%, reaching the highest increase in the last nine years.

This is the conclusion of the study conducted by the Ministry of Economy on the forecasted changes in the costs of labor and building materials for 2021-2025. In the case of an unfavorable global situation – logistics problems, high market demand, lack of increase in the capacity of producers and other factors – the increase in costs could reach an increase of 11.4%, according to the study. At the same time, the study predicts that in the period from 2022 to 2025 the increase in construction costs will decrease, however, in 2022 the increase is still predicted at 5.5% – significantly higher than in the pre-pandemic period. In the period 2023-2025, cost growth is expected to return to the average level of the last decade with an average annual growth of 3.3% per year, which is lower than in 2018 and 2019. According to the evaluations of the information and dynamics gathered in the study of the Ministry of Economy from 2020 to 2021, the risks of overheating of the construction industry are increasing, however, these risks are significantly lower than in 2006-2008. If at the end of 2021 the significant short-term jumps in the cost of timber and metal products will decrease, then the dynamics predicts a reduction in the risk of overheating in construction until 2022, and a similar trend will continue until 2025. In the construction of residential and non-residential buildings in 2021, an increase in the cost of the most important building materials should be expected in the amount of 14.7-14.8%, while the increase in wages is estimated as 6.9-7% in the study of the Ministry of Economy. In the construction of transport facilities, a significant increase in costs is predicted in 2021 for both building materials (10%) and maintenance and operation of machines and mechanisms (10%), while the increase in wages in the study is estimated at 8%, closely followed by architectural and other services with 7.8 % increase.

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