A study of the rate of price increase of building materials in Ghana

Abstract

The cost of building materials poses a significant threat to the construction industry and construction professionals. This research set out to study the rate of price increase of building materials on the Ghanaian construction market by examining the trend of price increase, developing price indices for some selected building materials, determining the causes of price increase of building materials and identifying the factors that influence pricing decisions when determining the final level of building material prices. Data were collected from 32 contractors, 33 building material suppliers and 30 quantity surveyors through selfcompletion questionnaire. Prices of selected building materials spanning from years 2011 to 2016 were obtained from the Public Procurement Board, Ghana for studying the trend of prices increase and also for development of price indices. Comparative analysis was used for studying the trend and the research made use of factor analysis in deriving the main factors that influence pricing strategies. It was found that building materials prices keep increasing year after year, which was caused by crude oil prices, energy cost, local taxes and charges, and cost of fuel and power supply. Economic factors, market conditions, environmental factors, political factors, producer related factors and production related conditions were found to be the factors that influence the choice of pricing decisions. The study therefore concludes that the prices of building materials keep increasing and if measures are not taken to control the causes, future prices are expected to escalate. It is recommended that drastic steps should be taken by the government to control the factors that cause the increase in the prices of building materials on the Ghanaian construction market.