Building and real estate costs

The price indices compiled by Statistics Finland measure so-called pure price changes. The idea is to monitor the prices of commodities and services included in the index and calculate index point figures based on them. The cost indices compiled by Statistics Finland describe the changes in purchase prices of inputs related to the manufacture or use of commodities.

Building Cost Index

Building cost indices are input price indices that describe the price development of production inputs used in building construction compared to the selected base period. Basic inputs used in building construction can be divided into three main types: labour, materials and services.

The official building cost index measures the price development of production inputs used in the construction of new buildings from the viewpoint of the construction enterprise or contractor. The total index of the official building cost index is calculated as the weighted average of four house project types. A production input distribution has been defined for each house project type based on how large the share of the input in question is in the total costs of the house project. Throughout the calculation period of the index (5 years), the house project types and the production technology of building construction defined during the base period are kept constant.

The building cost index is one inflation indicator in the construction industry. It is well suited for examining long-term cost development in building construction. The building cost index is used, for example, as a revision index in real estate taxation when updating the base value for the taxable values of buildings. Transfer price coefficients that are used in the maximum price calculations for government-subsidised rental dwellings are tied to the changes in the building cost index and insurance premiums are tied to the building cost index.

Index of real estate maintenance costs

The index of real estate maintenance costs describes the average development of real estate maintenance costs in the whole country in various real estate maintenance cost items, which in the 2015=100 index include:

  • Administration
  • Use and servicing
  • Grounds maintenance
  • Cleaning
  • Heating
  • Water supply and sewage
  • Electricity (real estate)
  • Waste management
  • Non-life insurance
  • Repairs

In addition, the indices for earlier base years include:

  • Plot rent
  • Real estate tax

The index of real estate maintenance costs produced with the latest base year 2015=100 does not take into account the effect of the plot rent and real estate tax on maintenance costs. These two items have been included in other index series with older base years. The 2015=100 index that has been expanded with the plot rent and real estate tax is produced as a special index. In addition, an index for the latest base year 2015=100 from which individual items have been removed, for example, energy costs (heating, electricity) and materials (heating, water and sewage, electricity) is produced as a special index. 

The index for the base year 2015=100 has been classified by type of building and cost item. The indices for older base years are available only by type of building.

The index describes how much the real estate’s maintenance costs have risen from the base period when no changes have taken place in the demand of the maintenance cost items. Special indices expanded with the plot rent and real estate tax describe the costs of operations.

The index is used to monitor the development of the cost level of real estate maintenance. The index can be utilised as comparison data of maintenance costs and in productivity examinations. The index can also be used to convert the total cost level, an individual cost item or the cost level of a particular type of building of a certain point in time between the calculation periods.

The data of Statistics Finland's other indices are used in the index of real estate maintenance costs. These include the consumer price index, producer price indices, labour cost index, volume index of newbuilding and building cost index.

The special indices of real estate maintenance are moved forward with the annual change of the 2015=100 weight structures.

Building Cost Index

Building costs

Building costs refer to the amount of money needed to complete a particular building or construction job whose characteristics have been determined in advance, when these costs have been determined based on input prices. The building cost index measures the cost development of construction work defined in this manner over time. The price of construction work refers to the amount of money with which someone is ready to perform the work in question. In addition to input prices, this price is defined based on the prevailing market price.

Professional construction

Professional construction refers to commercial building, building that is carried out against payment, cf. own-account construction.

Own-account construction

Own-account construction refers to building projects carried out by households, which include newbuilding and renovation building of detached houses, summer cottages, agricultural buildings and other outhouse buildings without using paid labour force. Cf. professional construction.

Transfer price coefficient

The transfer price coefficients are calculated based on the changes in the building cost index. They are used when calculating the transfer compensation of rental property shares in a real estate or housing company or the maximum price of a rental property leveraged with a long-term modernisation loan.

The calculation of the transfer price coefficient is always based on the building cost index calculated at any given time. The building cost indices for different base years have their own product selections and weight structures. This ensures that the index measures correctly the prevailing cost structure of construction at any given time.

Input nomenclature

The main classification of the building cost index is (the input nomenclature link), which is Statistics Finland's own classification. At the top level of the nomenclature, the input headings can be classified into three main categories (cost types): labour, materials and services.

Labour input

Labour input describes the development of labour costs in building construction compared to the base year. Their monitoring is based on the average earnings of full-time wage and salary earners and indirect labour costs in accordance with collective agreements of the construction industry and on earnings development projections.

Material input

The material input describes the price development of materials and supplies used in the construction industry compared to the price development of the base year. Their monitoring is based on a monthly inquiry directed at manufacturers, wholesalers and retail traders of construction materials.

Other inputs

Other inputs include price data on services that are not directly linked to building construction. Part of them are linked to building development and part to joint costs of the construction site. The costs from transport, machine works and lift installations are collected by monitoring subcontractor prices.

Type of building

In the building cost index 2015=100, building construction production has been divided into four building types: residential detached house, residential block of flats, business premises and production building. The overall point figure of the building cost index is calculated as the weighted average of the cost distributions of these building types.

Index of real estate maintenance costs

Real estate maintenance costs

The maintenance costs of real estate consist of maintenance costs.

Real estate maintenance costs

Activities that maintain the conditions required for a real estate to remain operational with the help of activity monitoring and control, as well as service.

Maintenance

Regular actions that through repairs and renewals aim at maintaining a real estate and its equipment in a condition that at most corresponds with the original condition.

Cost items

  • Administration – administrative expenses directly allocated to the real estate, technical and administrative house management, as well as general and office expenses.
  • Use and maintenance – real estate maintenance, maintenance of the functioning of equipment and systems, safety and cost monitoring.
  • Maintenance of outdoor areas – cleaning of outdoor areas, summer and winter work
  • Cleaning – costs arising from cleaning the real estate inside, washing windows and rented carpets (to the owner)
  • Heating – costs arising from the heat used to heat the real estate
  • Water and sewage – basic charges, domestic water charges, wastewater charges
  • Electricity – real estate electricity, cooling (the item does not include the electricity required by the user of the real estate)
  • Waste management – waste transportation and treatment costs charged by the disposal firm, waste bin rents, other waste management services
  • Non-life insurance – costs arising from the insurance premiums of the real estate (does not include business insurance)
  • Repairs – planned and unscheduled costs to maintain construction and building technology at the original level

Type of building

The types of building in the index of real estate maintenance costs 2015=100 are residential block of flats, office building, wholesale and retail trade building, industrial building, school building, health care centre and day care centre. In the indices for older base years, day care centre is not included in the building type classification. Detached house is calculated as a separate index not belonging to the overall index.