Rising prices could interfere with the construction of housing in Latvia

Construction costs continue to rise for several quarters in a row. According to the Central Statistical Office of Latvia (CSO), in the second quarter of 2021 the cost of construction compared to the corresponding period last year increased by an average of 4.7 %. In comparison with the first quarter of 2021, the construction costs increased by 3.4 %, including the prices of construction materials – by 4.3 %.

The Latvian Ministry of Economics predicts that construction spending in 2021 compared to 2020 will increase by a record 6.6 %, and it will be the biggest increase in the past nine years. And if the global situation is unfavorable (logistics problems, high market demand, lack of production growth, etc.) the prices may grow by 11.4 %.

From 2022 to 2025, the increase in construction spending may slow down, but 5.5 % growth is still projected in 2022, a much higher rate than before the pandemic. Between 2023 and 2025, spending growth is expected to return to the last decade's average of 3.3 % per year.
In residential and non-residential construction in 2021, we must reckon with a substantial increase in the price of construction materials, up to 14.7–14.8%, while wage growth in this sector will be 6.9–7%. Construction of transport facilities in 2021 will see a significant increase in the cost of construction materials (10%), maintenance and operation of machinery and equipment (10 %), while wages will increase by 8 %.