PHOENIX, ARIZONA, 25 February 2008 - Reduced activity in the home construction market will cause construction cost inflation to lose speed in 2008, according to a market forecast compiled by global construction and property consultant Rider Levett Bucknall.
In 2007, national construction costs rose an average of 9.0%, although this was exceeded in some of the more active markets, such as in Las Vegas, San Francisco, Los Angeles and Seattle, which saw construction inflation between 11.0% and 13.0%.
Looking forward into 2008, the report asserts that construction costs will continue to rise, but at slower pace than in previous years. Construction inflation will decelerate since prices for materials used in residential construction are dropping as a result of the housing slump. While nonresidential construction currently remains strong, tightened lending standards will threaten construction starts and spending in this market, opening up the possibility for further deceleration of material prices.
Julian Anderson of Rider Levett Bucknall commented: "The effects of the sub-prime mortgage crisis, acting as the trigger for recession in the 2007 residential market, are expected to have a continued impact reaching into the new year."
"We forecast that tepid or even falling prices for some materials will play a role in the overall dampening of construction inflation in 2008, with labor markets playing a larger role as the driver of cost escalation."
Each quarter Rider Levett Bucknall reports on the comparative cost of construction in 12 U.S. cities, indexing them to show how costs are changing in each city in particular, and against the costs in the other 11 locations. Together with additional international and national cost compendia, the cost research is meant to equip clients with proficient and relevant information to assist in key business decisions.
To download the latest version of the Construction Cost Report, or to view past issues, visit http://www.americas.rlb.com/cost-reports.html