coolthaihouse.com blog

One thing about it – it has been an absolutely horrendous year for anyone building a house. As you have heard there has been a tremendous explosion in the cost of basic materials here in Thailand, from cement used extensively in cement block houses, the actual cinderblocks, red bricks or Qcon blocks, wood used for formwork, sheetrock gypsum board using in ceilings, and on and on and on – prices are up across the board. Two of the big budget items for a concrete block house (of which the vast majority of houses built here are) are indeed the cost of steel and concrete (which is comprised of the cost of cement + aggregates which added together make concrete). The highest price increases have been recorded in the price of steel which is used extensively in the type of concrete construction used here in Thailand – as a re enforcing agent for foundation work, ground beam, support columns and then as the material in the roof truss.

I often get asked about how much more it would cost to build a house now vs. some time in the past. An INFLATION INDEX of building materials would be useful, as it would help us to compare past project budgets with proposed future projects and weigh the viability. It does involve a lot of assumptions, but the methodology is a follows:

• Compute the actual percentage increase in the price of 2 key components – steel and cement.
• Estimate the increase in the cost of labor from anecdotal evidence.
• Estimate the percentage of costs involved in a sample build as to Steel, Concrete, Other build materials and labor.
• Compute the increase in percentage terms from January 1, 2008 to the current date.

Here are the actual figures for steel and cement as to actual purchases made at dealers in Pattaya. There may and will be some cost differential in the provinces but percentage increases should be about the same. As you can see, the cost of steel has had the most dramatic increases, due mostly to the fact that it is influenced by international factors, where the price of cement is sourced locally and relies more on local cost factors.

Specification (English)	Specification (Thai)	Price Jan 1, 2008	Price Aug 21, 2008	Increase
Rebar 2 Hun 6 mm. SD30 (Dem)	เส้นกลม ¼ (มอก) โรงเล็กทั่วไป	50	82	64%
Rebar 3 Hun 9 mm. SD30 (Dem)	เส้นกสม 3/8 โรงเล็กทั่วไป	102	155	51%
Rebar 4 Hun 12 mm ribbed surface SD30	ข้ออ้อย 12 มม (เหลือง)	199	295	48%
Steel	Weighted Avg Price Increase			55%
Cement 50 KG Bag Portland In See Phet (Diamond)	อินทรีเพชร	130	150	15%
Cement 50 KG Bag Nok In See Daeng (Red)	อินทรีแดง	115	127	10%
Cement	Weighted Avg. Price Increase			13%

     The next thing to compute is the breakdown of costs associated to a typical bungalow project. Here is an example, based on this small bungalow build. Of course these percentages could vary greatly depending on labor arrangements and materials which go into the build.

• Labor 18%
• Concrete 10%
• Metal 11%
• Other building materials 61%

In other words, in a sample build labor comprised 18 per cent of overall costs, concrete about 10 percent, metal about 11 percent and other materials comprised the remaining 61 percent. Cost increases noted on other materials have increased across the board, but the increase is closer to the price increase noted for concrete depending on the composition of the material. Labor has also increased, but only marginally. What has happened in tourist areas is that there has been a shortage of labor, driving rates up. The day labor rate in Pattaya is about 250, but it is difficult to find anyone at that rate. Similarly, labor rate increases have been reported in the provinces also. Concrete contains aggregate (which is mixed with cement to make concrete). These aggregates have increased in price at about the same rate as cement itself. Here is an average estimate of the cost increases to build a small size bungalow since the beginning of the year, based on a start of year budget of 1 million baht.

Category	% of Build	Amt Jan 1 2008	Increase	Amt Aug 21 2008
Labor	18%	180,000	10%	198,000
Concrete	10%	100,000	13%	113,000
Metal	11%	110,000	55%	175,500
Other	61%	610,000	20%	732,200
total		1,000,000	21.85%	1,218,500

     The good news is even though metal is up 55% year to date, actual costs have only increased about 22%.

Tags: Inflation

This entry was posted on Thursday, August 21st, 2008 at 11:35 am and is filed under investment considerations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.