The evolution of construction costs over the past 5 years

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Over the past 5 years the Romanian construction market had registered important growths both in residential and commercial developments, new projects being started or delivered for all sectors and new opportunities rising in Bucharest as well as in major regional cities.

Although the market is going well in terms of new developments, sectors like modern office buildings, hotels and retail developments being at a higher level than the past few years, an important issue is affecting the construction process and also the interest of developers for future projects: the continuous increase in construction costs.

The tendency for innovation and sustainability, the new technologies and construction techniques, along with the legislative modifications and labour shortage in the area, has led to a massive increase of total construction costs for new developments in Romania over the past 5 years.

According to Eurostat database and statistics, the total construction costs had increased by 36% in the last 5 years (2015-2019). In the first quarter of 2019 the total construction costs increased by 9% compared with the last quarter of 2018.

 

1.1. Total Construction Costs Evolution 2015-2019

Total Construction Costs Evolution 2015-2019

In terms of building materials the situation is somewhat different as in 2015-2016 the cost for construction materials had registered decreases by 8,7% in 2015 and 2,6% in 2016. However, over the past 5 years the total costs with building materials increased by 16,5%. In the first quarter of 2019 the costs increased by 6,2% compared with the last quarter of 2018.

 

1.2. Construction Materials Costs Evolution 2015-2019

Construction Materials Costs Evolution 2015-2019

By category of objects, the highest increase in construction costs was registered for non-residential buildings (office buildings, retail and industrial developments, hotels) by 35,8% over the past 5 years, followed by a 35,8% increase in residential buildings costs and 35,5% for civil engineering buildings. In the first quarter of 2019 the construction costs of non-residential buildings had increased by 9,9% compared with the last quarter of 2018.

 

1.3. Construction Costs Evolution by Category of Objects 2015-2019

Construction Costs Evolution by Category of Objects 2015-2019

In terms of elements of structure, the highest increase of construction costs in the past 5 years was registered for capital repair works by 46,3%, followed by an increase of 42,3% in construction costs for maintenance and current repair works and 32% increase in new construction works costs.

 

1.4. Construction Costs Evolution by Elements of Structure 2015-2019

Construction Costs Evolution by Elements of Structure 2015-2019 2015-2019

In terms of labour costs in construction, Romania is facing a prominent lack of both qualified and unqualified personnel which, together with the legislative changes regarding the construction law implemented in the beginning of the year, generated the highest annual increase in hourly labour cost in the European Union for the first quarter of 2019. Compared with the same quarter of 2018, in Q12019 the hourly labour costs for construction in Romania increased by 16,3%. Compared with the last quarter of 2018, in Q1 2019, the labour costs in construction (both wages and salaries and non-wage components) increased by 5,1%.

 

1.5. Hourly Labour Costs Evolution in Construction Sector 2015-2019

Hourly Labour Costs Evolution in Construction Sector 2015-2019

Due to lack of personnel in the construction sector, that is estimated to intensify in the following years, the costs with construction workmanship is also on a growing path and is likely to double in the next 5 years, according to latest researches.

Along with the increase in construction and labour costs, the prices for land purchase have also increased over the last few years in Romania overcoming the growth of rent levels for office and retail spaces and forcing developers to design more innovative projects that will guarantee large revenues. 

Data source: Eurostat

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