Residential construction costs have kept rising since 2015, yet the growth pace has slowed. Direct Construction Cost Index data from ACR show that in the first half of 2023, materials and labor costs advanced by 2.8 percent compared with the same period a year earlier. This marks a clear deceleration from the early part of 2023 when the rise was around 13 percent, signaling a shift toward more stable price dynamics for now.
ACR attributes the easing in cost growth to several favorable factors. The conflict in Ukraine disrupted supply chains, energy prices have eased, and overall supply chain normalization has taken hold. These elements influence the pricing of key raw materials such as steel, aluminum, copper, and glass, with prices adjusting from the prior period. The report places the price evolution since 2022 into the context of this broader trend.
This stability in construction costs is not expected to trigger a rapid decline. Instead, it is likely to persist in the near to mid term, helping the industry reduce uncertainty and improve price forecasting. ACR researchers express optimism that this steadiness could continue through the remainder of the year, while remaining cautious about potential shifts from external markets and policy changes.
Looking ahead, the trajectory will respond to the health of the Chinese real estate market due to its global impact. The region has faced high leverage and notable defaults, with major developers reporting substantial debts. At the same time, inflation patterns in the European Union are shifting, and inflationary pressures in Spain appear to be moderating as conditions stabilize.
Which materials rise the most?
In the first half of 2021, wood carpentry emerged as the category with the sharpest price gains, surpassing ten percent, according to data tracked by ACR. Suspended ceilings and coverings followed with about a nine percent rise, while flooring and lifting devices climbed around eight percent each, and excavation costs grew by roughly seven and a half percent. In contrast, glass prices slipped by about eight and a half percent year over year, and exterior carpentry costs declined by around four percent.
Labor costs also showed resilience, offsetting some material price movements. ACR notes that skilled labor remained relatively stable but identifies a structural challenge in the industry. The sector has long faced an aging workforce, recruitment hurdles, and concerns about attracting new entrants to construction careers. This labor dynamic remains a primary driver of overall construction costs, underscoring the need for workforce planning and training initiatives to stabilize prices over time.