Study: Construction costs are the second highest in the region in Prague

Prague - Construction costs in Prague are the second highest compared to eight larger cities in Central and Eastern Europe, with only Zagreb, Croatia being higher. In the context of hundreds of global cities, Prague ranks 67th. The highest construction costs are in London, followed by New York and Hong Kong. This is according to the results of a study by the international consulting company Arcadis, which has been made available to ČTK.

"The rise in construction costs in recent years in the Czech Republic has been driven primarily by wage growth, which has even been higher than in the West, limited capacity of construction companies, and a temporary shortage of certain types of construction materials,” said Arcadis cost analyst Milan Vencl. Last year, according to him, prices of construction materials reached a peak, which will be maintained this year due to long-term contracted agreements.

Zagreb, with the highest construction costs in the region, ranked 64th in the global comparison. Following Prague (67th) are Warsaw (68th), Belgrade (69th), Krakow (71st), Poznan (72nd), Bucharest (89th), and Sofia (90th).

Six European cities made it into the top ten with the highest costs. In addition to London, they are Geneva (4th), Copenhagen (6th), Zurich (8th), Dublin (9th), and Edinburgh (10th). In contrast, the three cities with the lowest costs are from India, specifically Bengaluru, New Delhi, and Mumbai.

According to the study, there are two ways current measures against the spread of coronavirus could impact construction. First, there could be a supply-side shock, where development and construction projects slow down, get delayed, or come to a complete halt. The main reasons will be the lack of construction materials and technological units or missing construction workers. The second danger is a drop in demand due to a potential economic recession.

"In the Czech Republic, major construction projects are still being executed, and everyone is trying to minimize delays to a minimum. However, we are observing disruptions both in foreign workers and in the supply of construction materials from abroad, such as Italian tiles. Czech companies are doing their utmost to meet their commitments. Unfortunately, we are currently unable to predict the further developments,” added Josef Kalabis from Arcadis. According to him, it will depend on the extent and duration of government restrictions not only in the Czech Republic but also in neighboring countries.

According to a recent survey by CEEC Research, construction company directors in the Czech Republic expect the sector to decline by 10.1 percent this year compared to last year and by 3.1 percent next year. Just in mid-February, companies were forecasting a growth of 1.6 percent this year and 0.8 percent next year.