From August, central government will only compensate employers for sick pay costs that are considered higher than normal, which pushed the Index upwards. The temporary reduction in employers’ costs had a considerable downward effect on construction costs from April to June, and the central government compensation to employers for sick pay costs had a similar effect from June to July. Wages and salaries account for about 40 percent of the Construction Cost Index.

Developments between July and August 2020

The Construction Cost Index for multi-dwelling buildings increased by 0.7 percent in August 2020 compared with July 2020. In the corresponding period in 2019, the Construction Cost Index remained unchanged compared with the previous month. Contractors’ costs, which account for more than 82 percent of the Construction Cost Index, increased by 0.8 percent between July and August 2020. This increase mainly comes from the fact that central government no longer compensates employers for the entire sick pay costs. Contractors’ wage costs increased by 2.8 percent, while contractors’ other costs, which include wage costs, increased by 0.7 percent.

Contractors’ costs in the group ‘transport, fuel and electricity’ fell by 0.3 percent. This was mainly because the cost of diesel oil fell by 1.4 percent compared with July. Machinery costs remained unchanged.

Costs in the group ‘building materials’ fell by 0.2 percent, largely due to lower costs of iron and steel, including reinforcement steel and concrete.
Over the past month, investor costs, which consist of interest and credit costs, costs for plans, and central administration, rose by 0.3 percent.

Developments between August 2019 and August 2020

The Construction Cost Index for multi-dwelling buildings increased by 0.6 percent between August 2019 and August 2020. This increase was mainly due to higher investor costs. Investor costs increased by 3.8 percent on an annual basis, which led to an increase of 0.7 percentage points for the total index in the same period. This increase, in turn, was mainly due to higher interest costs. Contractors’ costs fell by 0.1 percent in August, which led to a decrease of 0.1 percentage point for the total index in the same period.

Contractors’ costs for wages and salaries remained nearly unchanged in August on an annual basis. In the period April to July, the annual rate of wage costs was negative as a result of various support measures related to the coronavirus (COVID-19) pandemic.

Contractors’ costs in the group ‘transport, fuel and electricity’ decreased, while contractors’ other costs, costs of machinery and building materials increased. White goods and material for painting accounted for the largest price increase in the building materials group.