Construction costs up 7.1pc on expensive raw materials
Construction costs shot up by 7.1 per cent last year owing to a sharp rise in the prices of key inputs such as cement, steel, bitumen, and fuel, which slowed down the steep growth the sector enjoyed in 2021.
Construction costs shot up by 7.1 per cent last year owing to a sharp rise in the prices of key inputs such as cement, steel, bitumen, and fuel, which slowed down the steep growth the sector enjoyed in 2021.
Data from the Kenya National Bureau of Statistics (KNBS) shows the Construction Cost Index, which tracks the cost of construction inputs, rose to 113.65 per cent in the fourth quarter of 2022 up from 106.12 per cent in the final quarter of 2021.
It is the fastest annual growth in construction costs since KNBS rebased the index in 2019. In 2020, the cost of construction increased by 2.59 per cent amid supply hitches due to Covid-19 restrictions that shut down global supply chains.
The costs rose further by 3.44 per cent in 2021 as demand for construction materials increased following the lifting of the Covid-19 restrictions before rising sharply by 7.1 per cent in 2022.
The construction index tracks the cost of 27 key construction materials including cement, steel and bitumen, five major equipment, including rollers, mixers, excavators and compressors and five labour elements including casual labourers as well as machine operators, transport and fuel.
Inflation
"The year-on-year construction inflation was 7.1 per cent in Q4 of 2022 compared to 3.44 per cent in Q4 of 2021.
The index rose from 106.12 in Q4 of 2021 to 113.65 in Q4 of 2022," said the KNBS.
The increase in the cost of raw materials saw demand fall, leading to a reduction in imports of bitumen and steel.
The agency is yet to release sectoral gross domestic product growth figures for quarter four of 2022, but in the third quarter, the sector recorded a 4.3 per cent growth, which is a slower growth compared to a growth of 6.7 per cent in the corresponding period of 2021.
During that period, cement consumption fell by 14.6 per cent to 2.217 million metric tonnes while the quantity of iron and steel imported declined from 274,134 metric tonnes in the third quarter of 2021 to 198,849 metric tonnes in quarter three of 2022.
Further, the volume of imported bitumen decreased from 36,762 metric tonnes in quarter three of 2021 to 24,930 metric tonnes in the third quarter of 2022.
The increase in the cost of construction increases the budgets of not only private players doing construction works such as real estate projects but also the government's implementation of key projects, including roads, bridges, dams, and public facilities such as schools and hospitals.
A recent Integrum Construction Project Managers' Report showed that construction costs ranged between Sh34,650 to Sh77,500 per square metre last year, an increase from between Sh33,450 to Sh72,400 per square metre in 2021.
"The construction costs in Kenya averaged from Sh34,650 to Sh77,500 per square metre equivalent to Sh3,219 to Sh7,200 per square foot," the report reads.
"The 2021 cost was Sh33,450 to Sh72,400 per square metre, equivalent to Sh3,135 to Sh6,785 per square foot."
