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Building inflation: Materials and labour inflate construction costs by 25% in Italy

[Feb 6, 2023]




Gad's Construction Cost Report study: the increase causes delays on the roadmaps of interventions and, often, an overshoot of estimates.

According to Gad's Construction Cost Report, in Italy, the cost of renovation and construction increased by more than 25% in 2022 compared with last year. Building inflation figures are reported in the Construction Cost Report 2022, the study on price changes in the Italian construction market prepared by Gad Studio. "Compared to the pre-Covid period", explained Gianpiero Aresi, CEO of Gad to the Sole 24 Ore, "the trend confirms an average increase of 25% in net costs, measured by virtue of the trend in raw materials costs, without including revaluations of general expenses and company profits, which are also a significant factor". This is an "average figure that does not find significant deviations between new constructions and the recovery of the existing one". The number is the result of an algorithm designed specifically to determine the construction costs and allows to quantify one of the problems that risks to curb even the grounding of the PNR: the price of materials.

In Italy there are more than a thousand projects in progress, all over ten million (45% renovation, 25% building replacement, 30% new construction). At least 50% of these, Aresi estimates, are stuck at the starting blocks due to price stress. In the study, the focus is on reducing overheads and it is highlighted that the only way to eliminate the risks related to safety, obtain certain times, buildings manageable and maintainable is the industrialization of the sector, also through digitization. The slowdowns in the design phase, whose duration, on average, doubles, affect the time taken to complete the works. But often the phase of the race itself is prolonged, with the costs of intervention rising and leading to an overshoot of the originally planned budgets. According to Gad's study, the final price is influenced by raw materials and, more in detail, labor, hires, materials, indirect costs and overheads. Although, it must be said, the increase of a component does not automatically lead to an increase in the final price, which also depends on how much its cost affects the total.

Specifically, Gad estimates an increase of 15% for iron and steel due to the Russian-Ukrainian war and energy prices. Risks that, in cascade, affect a whole range of other materials, starting with cement and concrete, increased by 59% (also for the cost of emission rights that companies have to buy to produce). The effect also concerns rock wool insulation (+15%) and polystyrene insulation (+20%), both products also burdened by the increase in oil prices. Wood stands at +11%. For glass, on the other hand, the price increases are 38%, while for bricks 20%, again because of energy prices.

On the labour market, there has been an average hourly cost growth of about 5% in the last two years, an increase of 60% higher than in the previous two years.

From the recent surveys of the Chamber of Commerce of Milan it is evince that the component of the relative price to hires and transports instead is sketched to +20% for the activities that require movements earth, of 10% for those of piling and of 15% for the realization of structural works. "Analyzing a fašade area of one hundred square meters for six months of rental" reads the report "the total cost of scaffolding, including assembly and dismantling from price point of view of the Lombardy Region sees a percentage increase of +54 percent". To all this is added the inflation risk, to which, Gad explains, "investors respond with the proposal of armored contracts and transferring the risk to the company, which in turn protects itself with an early increase in the offer phase".

Source: quotidiano.net

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