Building sector tender prices have grown by 14.1% despite challenges faced by many industries due to economic climate and constant loadshedding.
This is based on the survey conducted by the Bureau for Economic Research (BER), which indicates that the building cost index (BCI) accelerated significantly in the first quarter of 2023.
The bureau stated that less pressure on building contractor profit margins as tender price growth outstripped input cost increases in the first quarter of this year. This means an upward revision to the fourth quarter of 2022 escalation rates, implying that there was some momentum in tender price growth in the building and construction industries.
This is regarded as the highest rate of growth since 2008 – after a prolonged period of relatively low growth in the industry.
The bureau economist Tracey-Lee Solomon said: “The improvement in tender price growth is in line with a decline in tendering competition and an up-tick in building activity.
“The tender price competition index is at its lowest since the end of 2007.”
Solomon said the first quarter of BCI in 2023 of growth in tender prices exceeded input cost growth. “While the improvement in tender price growth is encouraging, the BCI has lagged in input costs since the start of the Covid-19 pandemic. What we are seeing now is not necessarily an out-performance by the BCI but rather a process of catching up,” said Solomon.
Input costs increases in building moderated in the first quarter of 2023 to 9.2% year on year from 9.6% in the previous quarter. In the data released in April, it was revealed that a drastic slowdown to 6.1% year on year had been realised. This was a result of a 1% monthly decline in April as well as a higher base at the same time last year, with the vision of a higher base expected to drag on input cost increases throughout 2023.
Since the start of Covid-19 pandemic in 2020, building input costs have risen by more than tender prices, and as such affected building and construction companies on other factors such as construction material costs, labour wage rates, project schedules and construction site conditions.
For more business news from Sunday World, click here.
Follow @SundayWorldZA on Twitter and @sundayworldza on Instagram, or like our Facebook Page, Sunday World, by clicking here for the latest breaking news in South Africa.
