Property construction costs in Spain have surpassed their historical high in less than six months, indicating where the market is headed
Private firms’ statistical data isn’t always useful to the market, but in Spain, specifically when it comes to building expenses, the Property Construction Costs in Spain Index, released by a company named ACR Groupo, has some clout. And their most recent report reveals some significant changes..
According to their most recent data, residential building expenses increased by about 10% in the last six months, which is a new high.
After 16 consecutive quarters of growth, construction prices were already hitting historic highs in the fourth quarter of 2019. A rising trend that was halted in 2020 by the Coronavirus pandemic, which caused the Index to decrease by 3.8 percent by the end of the year. However, pricing in 2021 followed the trend of prior years, and the decline was quickly replaced by strong growth, resulting in prices that are now 7% higher than they were before the Corona virus was discovered.
The hikes in the last six months, according to Guillermo Jiménez, General Director of ACR, are largely due to increases in the prices of raw materials such as steel, wood, aluminium, and copper. There have been no major rises in the cost of labour in recent years, which has been the main source of the continual rise in building prices. In any case, “it is difficult to predict how prices will behave in the future months and whether or not this would have an impact on enterprises in the industry that, given the uncertainties of the previous year, may have assumed certain risks to maintain their level of activity,” Jiménez said.
The costs of foundations and structure of new constructions, normally leading indicators, have increased in price by 13.4% and 17%, respectively. Wood woodwork (+ 7.1 percent ) and glass (+ 10.4 percent ) have also seen price hikes. Only the earthmoving category experienced a year-over-year reduction of -1.8 percent.
The Construction Cost Index is an important instrument for assessing market movements since property values, both new and used, closely follow these patterns, and if there is a bigger increase in construction costs, it is usually very quickly followed by increases across the property market.