Wood and concrete are cost drivers: construction prices are rising enormously

Created: 04/07/2022Updated: 04/07/2022 11:03 AM

By: Yannick Hanke

Construction prices have recently risen enormously in Lower Saxony.

This results from increased costs for raw materials such as concrete and wood.

(kreiszeitung.de assembly) © Julian Stratenschulte/dpa/imago

Concrete and wood are increasingly becoming cost drivers.

The result: building prices have risen enormously in Lower Saxony.

How is it otherwise in Germany?

Berlin/Hannover – Building is getting more and more expensive, that's practically set in stone.

The costs for this have risen enormously, especially in the past two years.

While from 2019 to 2020 the construction costs for residential buildings only increased by 2.2 percent, from 2020 to 2021 the costs actually increased by 9.6 percent.

The State Office for Statistics in Lower Saxony reports on this in its current Statistical Monthly Bulletin.

This is reported by kreiszeitung.de.

Construction prices in Lower Saxony have risen enormously: scarcity of raw materials leads to more expensive wood and concrete work

However, with this development in terms of increased construction costs, the following must be taken into account: Between July and December 2020, value added tax was reduced from 19 to 16 percent.

A factor that partly also contributes to the price jumps after the usual VAT rate was applied again.

However, there are also significant cost increases for wood and concrete work.

This is an indication of the current scarcity of raw materials, which also affects the steel industry.

According to information from the State Office for Statistics in Lower Saxony, prices for new residential buildings rose by 15.5 percent compared to November 2020 and November 2021.

And in August 2021 the price increase compared to August 2020 would have been 12.9 percent.

Demand for timber has increased - as a consequence, carpentry and woodwork in Lower Saxony are becoming significantly more expensive

But what ultimately led to the price explosion?

According to the Lower Saxony State Office for Statistics, this is mainly due to the high demand for timber.

In November 2021, residential carpentry and woodwork prices were 46.5 percent higher than in November 2020.

And according to the state office, the price for carpentry and woodwork has risen by 35.9 percent on the annual average compared to the previous year.

To put this in context: in 2020, the average price increase in this regard was only 1.5 percent.

Reduction of VAT with influence on strong price increases in the construction sector in Lower Saxony

However, the prices for the maintenance of residential buildings also went up – by 16.5 percent compared to November 2020 and November 2021.

For carpentry and timber construction work, the price increase was even 61.5 percent.

And cosmetic repairs also became more expensive.

In November 2021, craftsmen had to be paid an average of 6.8 percent more money for this work than a year earlier.

Due to the temporary reduction in VAT, there will no longer be any sharp price increases.

But the statisticians assume that there will be further supply bottlenecks and rising material prices.

The consequence: construction prices continue to rise – and not just in Lower Saxony.

Increase in construction prices in Germany will also be the case in 2022: the association expects growth of a further four percent

Because construction prices have risen sharply throughout Germany in 2021.

This applies to the construction of houses as well as apartments.

As "tagesschau.de" reports, citing the Central Association of the German Construction Industry (ZDB), the strong price increase in 2021 will continue this year with an increase of six percent.

For 2022, the association expects at least an increase of another four percent:

That means things are calming down a bit, but prices are still rising.

Felix Pakleppa, General Manager of the Central Association of the German Construction Industry (ZDB), to "tagesschau.de"

And it is also not yet foreseeable whether the price level from before the corona pandemic will be reached again.

This would be mainly due to the sharp rise in material prices.

In general, Pakleppa sees the industry facing difficult challenges.

He explicitly refers to the traffic light coalition agreement, according to which "400,000 new apartments are to be built per year and that apartments can be rented at reasonable prices if possible".

Construction prices in Germany: Costs are rising due to high energy prices, inflation and wage increases - Ukraine war not yet taken into account

On the other hand, there would be ambitious goals in the areas of sustainability and climate change.

And such requirements would lead to "building becoming more expensive because we have to build with better energy efficiency".

In fact, the biggest price increase was for lumber.

According to Pakleppa, the national average prices would have roughly doubled in 2021.

Since the turn of the year from 2021 to 2022, construction timber has become somewhat cheaper.

But you would still be up 89 percent compared to the pre-pandemic period.

Last but not least, high energy prices, wage increases and inflation are identified as further price drivers for the construction industry.

The economic effects of the Ukraine war were not even taken into account.

Relief package 2022: Traffic light reacts to increased energy and fuel prices - and makes financial concessions to consumers

The situation is different with the 2022 traffic light relief package.

The SDP, FDP and Greens are reacting directly to increased energy and fuel prices, a consequence of the war of aggression waged by Russian President Vladimir Putin.

Politicians were able to agree on five measures that will at least partially accommodate consumers financially.

Specifically, the federal government's relief package includes the following measures: an energy price flat rate*, a subsidy for recipients of social assistance, a children's bonus, a 9-euro monthly ticket for bus and train and a fuel discount.

Details often have to be clarified, however, with regard to implementation, payment dates or when a measure will take effect, a lot is still open.

* kreiszeitung.de is an offer from IPPEN.MEDIA.