Biggest Price Hike in Construction Costs since 2008
While the construction costs for residential buildings have been going up steadily for years, they climbed faster in August than at any other time in nearly a decade. According to figures released by the Federal Statistical Office on 10 October, the one-year price growth in August 2017 equalled 3.1 percent.1 The previous price check in May 2017 had returned a positive growth of 2.8 percent year on year, and this was already up from 2.6 percent in February 2017. The figures therefore suggest that the price trend is accelerating much faster this year than it did in prior years. As a reminder: Between 2013 and 2016, the annual average price growth had moved in a range between 1.6 and 2.1 percent.
High Construction Costs Raise Rents and Prices
In August 2017, prices surged especially for earthworks, showing a 4.6-percent increase over prior-year period. Price hikes nearly as steep were reported for sheet metal work (plus 3.9 percent), scaffolding work (plus 3.7 percent) as well as roofing and roof sealing works (plus 3.6 percent). At the same time, maintenance costs for residential buildings (not including small repairs) showed a substantial increase by 3.5 percent.
Rising construction costs are quickly becoming an issue in the housing construction business. Higher costs for the development of new buildings will be passed on in the form of higher rents and prices. Property developers are forced to raise their prices if housing development is to remain a paying proposition.
Shortage of Apprentices in the Trades
High construction costs are generally blamed on two factors: rising energy requirements for new buildings, on the one hand, and the high capacity utilisation of the building industry, on the other hand. Meanwhile, the construction sector is booming as a result of the keen demand. In July, reports put the overall surge in revenues at eight percent year on year.2 In structural engineering (meaning the construction of buildings), the growth in revenues was actually as high as 11.8 percent.A shortage of manpower could further drive up construction costs. The trades in Germany are plagued by a conspicuous shortage of apprentices. On 10 October, the German Confederation of Skilled Crafts (ZDH) reported that 19,000 apprenticeship openings nationwide have yet to be filled. The shortage in apprentices is most acute in the electrical, sanitary and heating industries.3