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Construction costs will increase rapidly in 2020

This year, too, clients have to expect an immense rise in construction prices – the construction industry remains a key pillar for the economy in Germany.

Living space is becoming scarce, rents are rising, there is construction under demand, and yet construction companies are fully utilized. You benefit from this by constantly increasing their prices.

Where the high prices come from

The construction industry is strongly supporting the economy in Germany, especially rental housing construction, as the demand for housing continues. The Federal Government is therefore supporting housing construction with special depreciation and child benefit for families. In addition, rural municipalities are increasingly requesting services for schools and road construction in order to improve the infrastructure. So the demand is huge, construction companies cannot keep up. This is because there is hardly enough good workforce in companies and municipalities that can deliver high quality. Since construction companies can predict that demand will continue to exist in the next few years, they have greater price leeway for remuneration for work performance, which is reflected not only in the company’s turnover, but also partly in the salary of its employees. In addition, material costs are increasing: resources are becoming fewer and materials – especially sand and gravel – are becoming more valuable and expensive.

Biggest price increase in earthworks

In recent years, construction prices have risen in all sectors due to these factors, but there are clear differences between the trades: Civil engineering in particular benefited from the high demand for new buildings and improvements to the infrastructure – in 2019, the prices for earthworks rose compared to Previous year by 5.2 percent. This is followed by roofing work with 4.2 percent and structural work with a 3.6 percent price increase compared to the previous year. In particular, concrete and masonry work has become more expensive. Since the number of refurbishments and maintenance is also increasing, costs for electricians have risen rapidly in recent years.

DIW forecasts

The German Institute for Economic Research forecasts a price increase of up to 3.3 percent this year compared to the previous year 2019, the forecast for 2021 is also around 3 percent. These numbers may not sound that high at first, but they are significantly higher than the inflation rate of 1.5 percent calculated for the period December 2018 to December 2019.

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Dr. made similar forecasts Michelsen, head of DIW in Berlin, already at the beginning of last year. It is becoming apparent that the development will continue to be similar in the coming years. He also said in an interview that construction costs would increase, particularly in urban areas, but that rural areas would be less affected. This means an increase in costs not only for clients, but also for tenants.

Image sources: 1000 Words / Shutterstock.com

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