Construction prices for residential buildings have risen sharply again


Lerato Khumalo

The costs of building residential buildings have once again risen significantly. This could have consequences for planned projects.

The prices for the construction of new residential buildings continue to rise sharply. The cost of building new conventionally manufactured residential buildings rose by 15.1 percent in February compared to the same month last year, the Federal Statistical Office announced on Thursday in its quarterly statistics.

Last November, there was an increase of 16.9 percent. In May 2022, there was the strongest increase in more than 50 years at 17.6 percent. From November to February alone, construction prices rose by 2.7 percent.

According to statistics, structural work increased in price by 13.7 percent within a year – concrete work became 15.2 percent more expensive, masonry work by 12.7 percent. Roofing work cost 17.1 percent more, carpentry and wood construction work only 3.0 percent. Prices also rose sharply for finishing work: carpentry work, for example, became 17.3 percent more expensive, heating systems and water heating systems by 18.2 percent.

At the beginning of February, the Statistics Office also reported significant price increases for almost all building materials. The Federal Ministry of Construction stated that construction prices for residential buildings were expected to rise by six percent this year and by 2.5 percent next year.

New construction prices for office buildings also rose in February, by 15.5 percent compared to the same month last year. The increase for commercial buildings was 15.4 percent, and for road construction it was 17.9 percent. All figures refer to construction work on the building, including VAT.

The enormous increase in costs threatens to lead many builders and investors to distance themselves from planned projects – especially since not only do they have to pay more for materials, but interest rates have also risen noticeably. “Excessive prices for land, existing properties and construction, which have developed over the long period of low interest rates, are now facing a correction,” write the leading economic research institutes in their joint diagnosis for the federal government.

“Until this is implemented on a broad scale, demand for construction services is unlikely to pick up again – despite the pressing housing shortage in some places.” As a countermeasure, the institutes propose reducing the property transfer tax, which has been rising in almost all federal states for years.