Construction prices 'in free-fall'

CONSTRUCTION prices are in free-fall according to global construction consultancy Davis Langdon.

The latest market forecast by the consultancy found that prices fell by five per cent between the second and third quarters of 2009, and have fallen by 15 per cent over the last 12 months.

Some clients have been able to secure prices that show much greater price falls: structural steelwork prices have fallen by 40 per cent over the last year. Many clients are taking the opportunity to re-tender projects that have been postponed or delayed to secure lower prices.

The volume of new construction orders obtained by contractors in the first eight months of this year was 30 per cent lower than the volume of work around in 2007, a higher figure than expected in the early part of the year, caused by increased spending on schools and colleges. The result has been severe competition throughout the supply chain, said Davis Langdon.

A number of construction industry wage agreements have been frozen for 2009/10 because of the market conditions, but materials prices, including steelwork, have bottomed out and even begun to rise. Rising commodity prices and the falling pound are leading the way.

The consultancy forecasts that 2010 will be a year characterised by insolvencies and consolidation as workload remains scarce. Further price falls of five to eight per cent are forecast for the year ahead, by which time construction prices may have fallen by as much as 25 per cent from their peak in spring 2008.