Material shortages persist: Construction prices are skyrocketing

Status: 07/09/2021 01:06 p.m.

Construction prices in Germany keep climbing. In May, the price increase for the construction of new houses and apartments was the highest it has been in 14 years. This is mainly due to the lack of building materials.

Building is getting more and more expensive. In the meantime, price increases in the industry have reached highs for many years. The prices for the new construction of conventionally manufactured residential buildings were 6.4 percent higher in May of the current year than in May 2020, as calculated by the Federal Statistical Office.

That was the highest rate of increase since May 2007. At that time, prices had risen by 7.1 percent – partly due to the increase in VAT from 16 percent to 19 percent.

A lack of material makes building materials more expensive

This time the reasons are different. The great global demand for building materials such as wood, steel and insulation materials on the world markets is driving up prices. Carpentry and wood construction work in Germany, for example, rose above-average in price, here prices in May 2021 were 28.5 percent above the level of the same month last year. The prices for structural work on residential buildings, for which a particularly large amount of steel in reinforced concrete or wood is required, rose by 7.3 percent compared to the same month last year.

But prices also rose sharply in other areas. Roofing and waterproofing work cost 8.3 percent more than a year earlier, plumbing 8.1 percent more and drainage work 7.8 percent more. Concrete and masonry work make up the largest share of the shell construction work – prices here rose by 6.6 and 4.8 percent, respectively.

In many cases, the significantly higher prices for work in the construction sector also hide the price hikes for materials. The producer prices for building materials such as wood, steel or insulation materials were well above the previous year’s level in May. Solid structural timber was 83.3 percent more expensive than in the same month last year, roof battens by 45.7 percent and construction timber by 38.4 percent. Reinforcing steel in bars cost 44.3 percent more in May 2021 than a year earlier, reinforcing wire mesh 30.4 percent more.

Strong plus also from a quarterly perspective

Compared to February 2021 – the previous reporting month of the statistics – construction prices continued to rise and rose by 3.6 percent. In contrast to many other statistics, the Federal Statistical Office only publishes its findings on construction prices once a quarter and not monthly.

In spite of the development, sales in the construction industry in Germany have so far been below the previous year’s level for the year: According to the Federal Office, sales from January to April 2021 were 5.6 percent below the figure for the same period of the previous year. The main construction trade includes the construction of buildings (structural engineering) as well as roads, railways and lines (civil engineering).

The high price increases could possibly push a still young technology: houses made from the 3D printer. Another problem for many people willing to build is likely to persist: in most areas in Germany, building land remains scarce and expensive.

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