WHY ARE CONSTRUCTION COSTS INCREASING?

A significant part of the increase in construction costs in the last year resulted from the increase in material costs. The share of the material cost index in the construction cost index is approximately 65% and the share of the labor cost index is around 35%.

The increase in material costs, which comprises a high share of the total cost, was more than twice the increase in labor costs. Therefore, most of the cost increase in 2021 was due to material prices. The increase in material prices is generally reflected on costs immediately. However, labor costs soared in January, as wage increases are usually made around New Year’s Eve. This increase is often parallel to annual inflation. When November data is announced, we will see that the cost increase is mostly due to materials. However, 30 to 40% increase in wages in January will increase construction costs by 10 to 13% for this reason alone. Due to rising raw material prices and rising domestic exchange rates, we will continue to see an increase in material costs, even if it slows down intermittently.