Survey: Real estate prices will rise by up to 19 percent due to increasing construction material costs

Prague – Real estate prices will rise by up to 19 percent due to the increasing cost of building materials and a shortage of workers. The prices of steel, wood, plastics, and insulation materials are rising the most. The implementation of projects for the lower-middle class and low-income groups is no longer profitable for some developers. This is according to the current study by developer companies H2/2021 conducted by CEEC Research, which is available to ČTK.

According to 74 percent of developers surveyed by CEEC Research, the increase in material prices is already reflected in the prices of development projects. And up to 13 percent of the developers surveyed have already been forced to postpone or suspend some construction projects, the study further indicates.

From the statement of Martin Hubinger, Director of the REALISM Construction s.r.o. group, it follows that although projects aimed at wealthier buyers will become more expensive, the impacts will most significantly affect the middle and lower classes. "Projects where buyers are extremely price-sensitive, namely those targeting the lower-middle class and low-income groups, will no longer make sense, and we will not strive to start or prepare them,” Hubinger stated.

On average, 63 percent of developers surveyed by CEEC Research observe price increases in products for interior furnishing (tiles, flooring, doors, windows, and others), averaging around ten percent. The remaining 37 percent perceive this price increase to some extent. "Suppliers will secure themselves with a higher markup on offer prices, and it can be expected that they will also cut costs at the expense of quality,” stated Pavel Malyshev, managing director of PRECO GROUP s.r.o.

In addition to building materials, there is also a long-term shortage of construction workers. "Even before COVID, the cost of labor was rapidly rising due to a shortage of workers in the construction industry and the absence of incentives for cheaper labor from abroad. Unfortunately, today this coincides with a sharp increase in the prices of materials and products caused by the disruption of supply chains due to repeated lockdowns,” said Jan Ludvík, director of Karlín Group Management a.s.

CEEC Research also indicates that there may be a decrease in margins for development companies. "We expect a steady slight increase in selling prices and a probable reduction in margins due to the sudden increase in building material prices," stated Martin Svoboda, CEO of JRD Development s.r.o. in a press release regarding the study.