As the world becomes more populated and progresses, so too does the demand for houses rise. However, the production of buildings can’t keep pace with the demand, which is why construction costs have been rising steadily for years.
Although a lot of factors play into this problem, one of the biggest reasons why you shouldn’t expect construction costs to decrease anytime soon is due to the rise in the cost of materials.
Still, is there any hope for construction costs going down? In this article we’ll explain how the cost of construction isn’t decreasing anytime soon.
Will Construction Costs Go Down?
Unfortunately, construction costs are not going down but rising. Again, the biggest reason for this is the cost of materials which continues to climb.
The building of structures is unable to keep pace with the demand, therefore the costs will continue to climb. Although we can’t guarantee anything, it’s not likely that construction costs will decrease anytime soon.
If you have a construction project you want to get off the ground, then we recommend opting for a sustainable design that is being promoted by governments all over the world via subsidies.
A sustainable design for your construction project will do you a favor in the long run as it will help your home function more efficiently and can be a lot cheaper than a non-sustainable design.
Why Won’t Construction Costs Go Down?
Rising Inflation
Inflation impacts construction costs by boosting the price of materials. For example, if the cost of steel goes up, then how much it will cost to construct a steel-framed building will also rise (see also “How Much Does It Cost To Build A 24×24 Garage?“).
This is also the case for other materials used in construction, such as concrete, glass, and lumber.
Another way inflation can have an impact on construction costs is by boosting the cost of labor. After all, when the cost of living increases then so too should the wages.
This means constructors will need to pay their employees more and this will subsequently increase the price of construction projects.
While inflation is one of the biggest reasons construction costs have been going up, it’s not the only reason. Another factor is an increase in land costs which have been rising all over the world. This means construction projects will cost developers more.
Construction Costs Have Been Rising Steadily Over The Years
The U.S. Bureau of Labor Statistics found that the producer price index for final demand construction was up 4% in May 2022 compared to 2021.
A few factors affect this trend, including a rise in the cost of labor and materials. But a deeper look at these trends show considerable growth in these economies. As well as the increase in purchase power as well as steady inflation growth, construction costs have increased too.
Plus, delivery, manufacturing and other factors have an effect of boosting the budget overall. Most earlier structures were built with material that was locally sourced, but now we are able to buy material from anywhere in the world and build infrastructure in challenging terrain.
Another factor to consider is that regular development and research also boosts the prices of early construction stages. However, it’s worth keeping in mind that construction is a one-off investment that can yield good results if a building is run and managed correctly.
Rising Material Costs
Construction economists have noticed increases in the double digits in the cost of construction materials and they predict these prices to continue to increase in the years to come. A big reason for this is the impact of Covid-19.
The pandemic has caused disruption to supply chains and also led to a decline in the production of construction materials. Meanwhile, there has been a rise in demand for these materials as the housing market continues to boom. This leads to soaring prices of construction materials.
Construction economists predict that materials costs will continue to grow in the coming years, although this will be a slow and steady increase. They also predicted that the cost of construction materials would rise in 2023 by an average of 4%.
Many factors contribute to the continual increase of construction costs.
First is the Covid-19 pandemic, second is the construction projects that were put on hold during the pandemic which created a backlog in demand, and the last reason is an ongoing labor shortage in the construction industry is boosting wages.
Rising Labor Costs
Labor costs are rising for a few reasons. One of the biggest reasons is the skilled labor shortage that is an issue in many countries. This shortage causes the cost of labor to rise as employers will pay more for employees who have the essential skills they need.
Another reason why labor costs are increasing is that wages have been stagnating for years now. This means that employees are not receiving a higher income while the cost of living increases, putting them in a challenging financial situation.
All of these factors play a part in increased construction costs. The growing cost of materials, growing inflation, a skilled labor shortage, and a spike in land costs all play their part in construction costs continuing to rise rather than fall.
Final Thoughts
As the housing market boom continues, construction costs also continue to rise. In fact, a survey of economists conducted by the Urban Land Institute found that construction costs are likely going to stay high for years to come.
If you would like to take on a home improvement project, it’s essential that you budget properly. Construction costs can quickly get out of control, so having a realistic approximation of what your project will cost is recommended before you get started.
Regardless of what you’re planning, it’s crucial to remember that construction costs are probably not going to decrease anytime soon.
By being well-prepared and properly budgeting you can make sure that your home improvement project doesn’t go off the rails!
We hope our article has given you an insight into how construction costs are going to go in the next few years.
Hey! My name is Luke. I am the Co-founder of PowellCustomHomes.com, it’s great to have you here at our site. With a combined 20 years of experience, we can help you build the home that you want, specific to your requirements and lifestyle.
No task is too small. We can guide you and offer advice, no matter if you are filling in gaps in the wall, hiding cords, or simply fixing up construction mistakes. We love to help, and strive to do so in any way that we can.
