Rise in construction costs forecast to slow

Developers will face less "sticker shock" from inflation of construction costs for the remainder of the decade, a prominent quantity surveyor predicts.

The BTY Group is forecasting construction inflation of six per cent in 2007, down from the 10-per-cent growth in costs it wrote into its 2007 estimate a year ago.

BTY estimates construction inflation will hit five per cent in 2008 and then three per cent through to 2010.

BTY Group principal Joe Rekab said the pressure on construction-sector wages has eased as pay rates have caught up with comparable industries.

He added that some construction unions have signed five-year labour agreements creating stability in wages.

Pressure on prices for construction materials have also eased with a slowdown in the U.S. housing market and falling oil prices.

Rekab said demands on the industry's overall capacity have been reduced as developers extend timelines on projects.

Rekab said the construction industry went through a prolonged period of doldrums, and between 1995 and 2001, costs were virtually unchanged. But between 2002 and 2006, construction prices shot up 65 per cent.

"When we look forward now, we're not saying costs will be dropping," Rekab said. "We're saying that the rate of increase will be reduced."

Phil Hochstein, president of the Independent Contractors and Business Association, said it is welcome news for his members.

"The key message for us is that there's now more stability and predictability of construction prices," Hochstein said. "Budgets can be more accurate, more manageable, and there will be no sticker shock halfway through a project."

(prepared by Derrick Penner/Vancouver Sun)