On German construction sites, prices have risen faster than they have in more than 50 years.

According to the Federal Statistical Office, prices for construction work including VAT were 17.6 percent higher in May than a year earlier.

That was the highest increase since May 1970, when they rose 18.9 percent year-on-year, the agency reported on Friday.

In the previous reporting month of February 2022, the increase was 14.3 percent.

Reasons are scarce and expensive materials as well as high demand.

The price increase was particularly strong for metal construction work (+23.6 percent) and concrete work (+23 percent).

Below-average increases were recorded for earthwork (+14.8 percent) and masonry work (+12.8 percent).

The Main Association of the German Construction Industry reports that this price increase does not mean any earnings control for construction companies.

"On the contrary: the increase in construction prices is a result of skyrocketing construction material prices, which companies are either stuck with or there is an increased risk that investors will shy away from new projects," said Managing Director Tim Oliver Müller.

Construction of apartment buildings is stalled

He points out that the producer price index for steel rose by up to 94 percent in May, lumber by 34 percent and insulating wool by 20 percent within a year.

Suppliers would hardly make any price commitments.

Therefore, since submitting a tender for construction companies is associated with considerable risks.

"They simply don't know whether their original calculation at the start of construction is still valid, or whether they are stuck with the increased costs," said Müller.

In order to spread the risks, he advises material price escalation.

Müller fears that new residential construction projects will be postponed due to increased construction costs and interest rates that are rising again.

"For some households, the dream of owning their own home will probably remain a dream for the time being when the budget originally planned is no longer sufficient - also in view of the simultaneous increase in energy and living costs," he said.

The construction of multi-family houses will also come to a standstill.

Industrial manufacturing methods could reduce construction costs, but this would require standardization of the state building codes.