Moderate price increase is expected in the near future

The prices of contractors, including the renovation or modernization, were growing dynamically between 2017-2019. The increase in prices also continued at the beginning of the year - as it became clear from the joint survey of Masterplast and GKI. The price of construction material raised significantly as well; however, appreciable differences were noted between the price dynamics of certain materials. The construction material prices and the fees of service providers are expected to moderate in the near future due to the uncertainty of demand and available capacity.

In the ‘10s the producer prices of construction industry increased moderately, with 2% annually until 2016. In these years, the housing construction performed weakly and the renovation sector delivered moderate performance. From 2017, an intense economic upturn started which covered the budget and corporate investments, the housing construction and, although to a lesser extent, the renovation and modernization sectors as well. All these affected the prices as well: the production prices in the construction industry increased with 5 percent in 2017 and with 10 percent both in 2018 and 2019. The cost of housing grew with 6,5 percent in 2017, with 5 percent in 2018, and with almost 10 percent in 2019. In the meanwhile, the prices of construction materials dramatically increased as well. While only with maximum 3% until 2016, the upswing in the construction industry considerably increased the demand, therefore, the prices increased with 4.1 percent in 2017, with 6.6 percent in 2018 and with 10.8 percent in 2019. In the first quarter of this year the prices increased with 8.5 percent on an annualized bases in the construction industry and with 10.3 percent in the field of housing. The prices of construction materials increased with 6.7 percent.

Sales price index of the domestic building materials (same period last year = 100; Source: CSO):

□ Bricks and construction materials in baked clay, in 2019: 111,8 / January-May 2020: 108,5 □ Floors and wall tiles: in 2019: 110,4 / January-May 2020: 101,7 □ Cement, lime, plaster: in 2019: 112,5 / January-May 2020: 111,3 □ Concrete products for construction purposes: in 2019: 112,0 / January-May 2020: 108,6 □ Parquet: in 2019: 97,4 / January-May 2020: 103,8 □ Wooden materials for household technology: in 2019: 104,7 / January-May 2020: 107,6 □ Paint and coating materials: in 2019: 104,9 / January-May 2020: 104,8 □ Plastic construction materials: in 2019: 101,2 / January-May 2020: 101,5

It is still questionable how the prices will change in the near future. The increasingly expensive organization of work would justify an increasing tendency; however, the uncertain demand could push the prices down. According to the results of GKI, 20% of the building companies would like to increase their sales prices in the upcoming 3 months, while 9% of these companies could live together with decreasing prices. These proportions refer to a more moderate increase in prices. A year ago, in 2019 June, one third of the companies expected increase in prices, while none of them calculated with falling prices.

Changes in consumer prices, 2016-2020

(same period last year = 100)

Source: KSH

The prices of services connected to household maintenance and renovation showed similar tendencies to the constructional prices – the prices increased dynamically from 2017 and reached the pike in the middle of 2019. Since then a slight decrease was experienced, however the rate of increase grew again in April and May, when the virus swooped down. Presumably, this will be a temporary trend and the pressure of price will expectedly decrease as soon as normality is restored. The respondents of GKI survey on renovation and modernization do not count with price increase in the next three months. It is noticeable though that the prices of service suppliers increased more dynamically compared to the prices of materials used for maintenance and renovation. This trend rooted in the increase of the demand for renovation as well as the lack of professional workforce and capacity. Thus, and the fact that the price increase was moderate in the market of DIY machinery, provided space for the DIY solutions.