Tuesday, May 30, 2023
BusinessHouses cost more than ever

Houses cost more than ever

Housing is now more expensive than ever, according to industry insiders, as the cost of building a house skyrockets as construction input prices continue rising.

Due to rising prices of nearly all inputs, both domestically produced and imported, the cost of construction for private and commercial developers has been steadily rising over the past three years.

It is a problem that comes on top of unmatched growth in both the demand for and supply of housing. This has caused the prices of all types of houses to go up. Insiders say that it now costs about 35,000 birr per square meter to build a house on average, excluding the expense incurred by the developer to lease land.

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Since the cost varies depending on the location of the site, the scarcity of land, a major driver of rising property prices, accounts for the lion’s share of developers’ budget. Even without land, the cost of building a house is increasing at an unprecedented rate.

“Direct costs, which include expenses incurred to purchase inputs such as cement, rebar, and finishing supplies, account for around 60 percent of the overall budget required to build the house. The remainder is an indirect cost incurred to pay overhead expenses and profit in the case of commercial developers,” Biruk Shimelis, Flintstone Homes’ deputy general manager, said.

Rising cement and rebar prices are a major contributor to the increase in construction costs. A quintal of cement now costs about 2,000 birr, more than double the price of a year ago. The same, if not larger, change was observed in the price of rebar, which now costs up to 130 birr.

“Not only have the prices of inputs climbed considerably over time, but so has the income for daily laborers. The country’s instability, along with age-old logistics issues, worsened the situation and disrupted the supply chain, contributing to the rise in construction costs,” said Tilahun Abebe, owner and general manager of a grade-one construction company bearing his name.

In Ethiopia, developers are heavily reliant on imports. They get cement, sand, and gravel from the local market. Imports provide rebar, finishing goods (including sanitary and bathroom fittings), and tiles. Even granite, which is abundant in the country, is primarily imported from countries such as China, with developers facing significant costs for shipments.

“With the instability of the FX market and the scarcity of dollars in the economy, the price of each input rises on a daily basis with no end in sight,” said Amha Sime, a contractor and former president of the Ethiopian Construction Contractors Association. The increase in construction costs has already been reflected in the final pricing of housing units.

Residential flats can now cost up to 75,000 birr per square meter, with foreign developers charging up to 120,000 birr.

Contributed by Daniel Nigussie

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