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Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited
Article Type: Internet update From: Property Management, Volume 26, Issue 3
In the last few years both domestic and commercial property prices have been rising at a phenomenal pace. House prices have been growing at double digits for several years on an annual basis, although on a monthly basis prices have fallen in each of the last four months; the first time this has happened since the early 1990s. Commercial property prices have also been hit with the IPD annual index recording a fall in capital values of 7.7 per cent in 2007 compared to the double digit returns seen in the past few years.
With prices now clearly on the turn, investors will have to focus on active management to increase income or maximise value. The same could equally apply to homeowners. One way for example to achieve growth in value is through undertaking refurbishment or other substantial works. Such works are not without cost and costs have been on the increase over the last few years, almost going unnoticed to many who have been benefiting the rise in values. But what information is there available on building costs, or related sites which may help unravel recent trends?
A useful starting point for build costs is the BCIS (Building Cost Information Service - see www.bcis.co.uk). This is the home of both commercial and residential price information in the UK. Given the value of such information there is little free data/ information available. You can register for a free trial on the site for seven days covering:
BCIS online - providing cost advice, benchmarking and building costs with average prices for 500 types of building and work rates.
Building running costs - for facilities managers, covering maintenance, facilities management, running costs, life expectancy and build prices.
Housing online - cost and benchmarking information for domestic dwellings, in similar form to BCIS online.
Rebuild online - for surveyors, valuers and loss adjusters covering rebuilding prices including by age and location.
Review online - quarterly review of building prices including average prices, tender prices and build costs.
RIBA/BCIS Building Cost calculator - service specific for architects with RIBA qualifications.
Unfortunately due to time restrictions I was unable to register for the trial; you need to fill in details and BCIS will then call back so the service is very much for those serious in taking a look at the information.
For those with a residential angle, there is a link to a house rebuilding cost calculator, (http://calculator.bcis.co.uk) which calculates the rebuild costs for insurance purposes. I ignored some of the detailed notes and had a little play around with the calculator itself. I assumed a 150 sqm detached property built in the 1970s in the South East of England with an additional cost of £10,000 for a garage and outbuildings. The total rebuild cost was £174,000. Taking the same property, but in Wales, the total cost came out at £155,000. You can plug in various assumptions to calculate costs, so it is a quick and easy way to look at values for insurance purposes.
Although a poor substitute to true costs, the monthly consumer price indices (CPI) published by National Statistics (www. statistics.gov.uk) provide a guide to increases in some costs. In the detailed sections, section 3 for the CPI index provides an inflation index for both materials and services for maintenance and repair of dwellings. Similar indices in the old Retail Price Index are also available in section 8 of the report, which will provide a longer run time series. Such indices are available to download free from the National Statistics web site. Of course in Europe, construction costs play a greater role in leasing activity where leases rise in line with the cost of construction index. The index provided by INSEE is available to view and download on line in PDF format providing an easy way of viewing how much rents will have increased from the on-set of the lease (http://www.insee.fr/EN/indicateur/indic_conj/indconj_frame.asp?ind_id=31). Of course the rise in recent years has been well above the increase seen in wider market rents, which has brought about changes, and new index is being launched for the retail sector which will hopefully dampen any significant increases from pure construction costs.
Construction statistics are also available from the DTI, which is in conjunction with the BCIS (www.berr.gov.uk/sectors/construction/). Just take the link to the construction statistics page where you can access a 252 page PDF file covering a range of statistics for 2007 including orders, outputs, investment, cost and price indices. Hard copies are available at a £48 charge, so it is probably best to rely on the PDF file which despite its size downloaded easily on a standard broadband connection.
EC Harris (www.echarris.com/) a leading international consultancy working on the real estate, infrastructure and construction sectors provides some publications to download in its research section looking at domestic and global cost data. Reports to download include a Global Build Costs index, which compares building costs across many countries relative to costs in the South East of England. There are also some more specific reports for some European countries including Germany, Spain, Poland, Romania and the Czech Republic.
Other bulletins I found from a quick search included Faithful & Gould (www.fgould.com), which included an international construction cost index. A similar index for the US market was found from the Turner Construction website (www.turnerconstruction.com) - just select cost index from the header of the screen. A copy of the latest index, and past copies from the year 2000 on a quarterly basis are available to view. Other sites worth a visit include Reed Construction Data (www.reedconstructiondata.com/construction-costs/) again focussed on the US and Canada. In the UK, Building magazine (www.building.co.uk) is worth a visit. Selecting the data option provides links to some stories and PDF files with construction costs at an international level. If you are interested in more depth stories then a search facility is available. I typed in “building costs” and returned over 100 matches with the articles free to view.
Looking more towards the cost of various commodities, many of the main news web sites such as the BBC or FT only cover precious metals such as gold or platinum. Trying to search for data on steel proved a little trickier. A site (www.uksteel.org.uk) provided some data although this was over a year old, so not much use for most professionals. I then tried the London Metal Exchange (www.lme.co.uk) though again this did not yield much information. It is possible that you need to subscribe to obtain such data.
I am sure there are numerous other web sites of interest out there, so please let me know if you come across any so I can pass on to the wider readership.
The view expressed are those of the author and not those of Jones Lang LaSalle.
Nigel AlmondAssociate Director, Jones Lang LaSalle