Global Construction Costs Set to Remain High in 2023
The global rebound in construction activity is set to continue over the coming years, supported by a wave of publicly funded infrastructure projects. This investment is coming at a time when global supply chain disruptions are hampering the delivery of construction materials, and tight labour markets are limiting the supply of labour.
According to a research report published by Oxford Economics a supply-demand mismatch has driven up construction costs, increasing the risks of cost-blowouts as well as project delays and cancellations. Meanwhile, lockdowns in China and the Russia-Ukraine conflict have intensified global supply chain disruptions, which means that input costs are likely to remain elevated for “some time”, the report shows.
According to Oxford Economics a boom in residential construction activity across advanced economies saw the real value of global construction work done rebound 2.3 percent in 2021. Residential investment boomed, particularly in the Americas, as low interest rates, strong household finances, and shifts in household spending boosted the appeal of single-family dwellings.
The ramp up in demand, however, coincided with Covid-induced supply chain disruptions and mobility restrictions. This mismatch between supply and demand drove a jump in construction costs across the globe, particularly for single-family homes.
Upswing in global construction activity set to continue over the coming years
According to the report governments around the world responded to the coronavirus pandemic by fast-tracking major infrastructure projects, as investments in the economy's productive potential has proven to be a key driver of economic recoveries in the past.
The Infrastructure Investment and Jobs Act in the US provides 500 billion USD in new spending over the next decade, with significant funding going to new highways, railways, and bridge projects. The European Union's Next Generation EU fund will in turn support a 'renovation wave' as the EU works towards decarbonising the continent's building stock. Meanwhile in Asia, China is set to undergo an infrastructure boom, as the authorities look to infrastructure investment to not only help offset the real estate downturn, but also to help the economic recovery following the Shanghai lockdown.
Text: Nina Garlo-Melkas
