Building Costs Continue Upward Trend as Kenya’s Construction Industry Battles Inflation

The Kenya National Bureau of Statistics (KNBS) has published the Construction Input Price Indices (CIPI) for the third quarter of 2024, highlighting important trends in the construction sector. According to the report, the year-on-year inflation rate for construction inputs was recorded at 3.37%, indicating that the price levels of construction materials have risen compared to the same period in 2023.

Key Findings

1. Overall Inflation Rate
   • The overall year-on-year CIPI inflation rate was 3.37% in Q3-2024, suggesting a general rise in construction material costs, although with some declines in certain sectors such as bituminous products and fuels.
2. Material-Specific Indices
   • Reinforcement Steel: One of the standout increases was in the reinforcement steel index, which rose from 163.32 in Q2-2024 to 170.93 in Q3-2024.
   • Cement: The cement index increased by 4.22% to 118.98 in Q3-2024, reflecting the growing cost of one of the most essential building materials.
   • Dense Bitumen Macadam (DBM): On the other hand, the DBM index saw a decrease of 2.66%, dropping to 157.80 in Q3-2024.
3. Cost Increases in Building and Civil Engineering
   • The Building Cost Index increased by 1.97% during Q3-2024, driven largely by material and labor cost increases. Notable material indices contributing to this rise included:
     • Materials: Increased by 2.80%
     • Labor: Increased by 2.13%
     • Transport and Fuels: Decreased by 0.75%
   • For Civil Engineering, the cost index rose from 120.91 in Q2-2024 to 121.43 in Q3-2024. This was primarily due to increases in the cost of reinforcement bars (+4.82%) and cement (+4.23%), while tack coat and DBM saw declines of 7.34% and 2.66%, respectively.

Tables from the Report

Table 1: Construction Input Price Indices and Inflation Rates

Table 2: Key Material Indices in Q3-2024

Table 3: Building Cost Index (BCI)

Trends in the Construction Sector

1. Rising Steel and Cement Costs: Reinforcement steel and cement were the two materials with the most significant cost increases in Q3 2024, highlighting continued pressure on the prices of essential construction inputs. This reflects the increased demand for construction materials in infrastructure projects.
2. Stabilizing Equipment Costs: While material prices rose, equipment costs remained stable in Q3 2024, with minimal changes seen across key categories like concrete mixers and excavators.
3. Transport and Fuel: Despite ongoing fluctuations in global energy prices, the transport and fuels index saw a slight decrease by 0.47%, reducing some pressure on overall construction costs.

As the construction industry in Kenya continues to expand, the cost of key materials such as steel and cement will remain a critical factor in shaping project budgets. The Q3 2024 data provides valuable insights into inflation trends within the sector, enabling industry players to better forecast and manage costs.