Firms must brace for higher ‘new normal’ construction material prices
New research by Oxford Economics suggests that construction materials prices have shifted permanently higher due to the shocks of the past couple of years. Project managers and investors should anticipate costs being at least 15-20% higher in 2024 and onwards than in 2021.
Materials costs should fall in 2023 and 2024. Costs of key input commodities are falling, while weaker economic conditions will slow demand for the construction sector, further easing supply-chain blockages which have caused shortages in recent years.
Beyond the coming couple of years, new additional upward pressure on materials prices will come from the cost of energy transition, and the scarcity of labour as workforces age.
In our view therefore materials prices have shifted permanently higher, and project managers and investors should anticipate costs being at least 15-20% higher in 2024 than in 2021, rising by another 15% or so by 2030 in the US and even more in China.
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