Building, construction tender prices fall in first quarter as prices rise

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31-03-2022
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IOL
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Annual growth in tender prices, as measured by the BER Building Cost Index (BCI), accelerated by 5.9 percent in the last three months of 2021, but preliminary data shows a marked slowdown in the first quarter of 2021.

“Growth in tender prices has remained subdued even though building material costs are in double-digit territory, and have been for some time. This is a reflection of the continued weak demand for building construction,” BER senior economist Craig Lemboe said.

Towards the tail end of the year, input cost price increases moderated somewhat as supply chain disruptions eased.

However, developments in the first quarter of this year had resulted in intensified price pressure, he said in a statement.

The war in Ukraine for example, had driven steel prices up to new record prices. The reason for this was twofold. Both Ukraine and Russia were large steel producers, and the war had disrupted supply chains as well as production.

Meanwhile, a rising number of Covid-19 infections in China, the world’s largest steel manufacturer, had led to various lockdowns, further exacerbating supply constraints, said Lemboe.

Among other important inputs, copper prices also rose rapidly in March. This was after data showed that output in the world’s top producer, Chile, fell to its lowest level since January 2011.

Data showed that Chile’s copper output fell by 15 percent month-on-month (m-o-m) and 7.5 percent year-on-year in January 2022.

Rising energy and fuel costs should also add to contractors’ overall bill.

Lemboe said looking ahead, tender prices were expected to remain comparatively subdued.

“Although we forecast an acceleration in tender prices for the rest of 2022, it is expected to remain well below the growth in input costs. As a result, there will be downward pressure on building contractors’ already strained profit margins”, he said.

The BER Building Cost Index is compiled from information collected quarterly by means of a questionnaire from a group of quantity surveyors. The index is compiled by analysing current price movements of 22 representative cost components that are common to all buildings.