# Comparability

## Contact info

Prices and Consumption, Economic StatisticsPeter Fink-Jensen

+45 39 17 31 88

## Get as PDF

The Construction cost index for residential buildings follows European regulations and is therefore comparable to construction cost indices produced by countries that report to Eurostat. The index can also be linked to former construction cost indices for residential buildings (2003 = 100 and 1987 = 100). Historically, construction cost statistics have been calculated since the 1920's, but those are not comparable to the contemporary statistics.

### Comparability - geographical

Construction Costs Index for Residential Buildings follows EU regulations and is reported to Eurostat. The index is therefore directly comparable to the construction cost indices produced by other EU-countries that follow EU regulations.

### Comparability over time

It is possible to link and compare the new construction cost index for residential buildings with former construction cost indices. However, when comparing indices it should be borne in mind that their weights are based on different buildings that may have been constructed using different techniques and materials, and in periods with different legal demands. This means that not only the weighting scheme but also the type of products, and the methods used for collecting prices and calculating the indices are different.

There have been changes the following years:

The first construction cost index was published in 1920 and was an index for smallholding (indeks for husmandsbrug). The index had base year in 1914. The house was not very well described, only that it contained 3 rooms, kitchen, laundry and stable. There were thus great differences in the data reported by the cost surveyors.

In 1926 a new collection of information about a specific type of house was started. By that means it was possible to follow the price development independent of any improvements of the furniture in the house. This index was revised in 1959 when it was decided to use a farmhouse and a farm building from a type book of the ministry of agriculture. 1959 was the base year. Calculation of this index was terminated in 1970.

In 1940 a new monthly index for a block of flats was published. This index should measure the development in the costs of residential construction. Base year for this index was 1939. This index was replaced in 1955 by a quarterly index. The weighting scheme of the quarterly index was established on an index house. This index house was a residential construction in 3 floors with 6 staircases and 36 apartments. In this index 1955 was base year. It was still calculated in 1972 for the sake of long-term contracts even if new indices were published.

In 1969 and 1971 two new construction cost indices for one-family houses and a block of flats were launched. Calculated indices by profession and by building parts were introduced.

In 1989 a construction cost index for residential buildings replaced the two indices, with 1987 as the base year. The choice to go from two indices to one was made because there were no longer significant differences between the two building types in terms of construction methods and choice of materials.

In 2003 the construction cost index was once again divided into separate indices for one-family house and multi-family house, respectively, and the base year was updated to 2003.

In 2016, a number of improvements were made to the existing construction cost index, such updating of weights, and a change in the method used to calculate labor costs. The base year was also updated to 2015.

*Differences in classification*:
As mentioned above only one total construction cost index was published until the publication of the two indices for one-family houses and a block of flats in 1969 and 1971. Hereafter, indices were calculated by profession and by building parts.

*Differences in the concept of price*: The monthly construction cost index published from 1939 to 1955 was calculated on the basis of information from the Wholesale price index about 20 of the most important construction materials. The labor costs were calculated on the basis of changes in the collective agreed wages in the construction industry. The index included in this way the direct expenses and excluded cost of engineers and architects. In 1955 the concept of price was changed. After this Statistics Denmark collected prices for 132 of the most important or most representative materials. The collected prices were net prices i.e. the invoice prices the master had to pay the supplier of materials excluding general discounts and any profits and including any given duty (i.e. including purchase tax (oms) per 1.8.1962 and VAT per 3.7.1967). The labor costs were calculated on the basis of the current price list in the provinces. The price list was based on collective agreements including social contributions among other things allowance for public holiday.

In the two indices published from 1969 to 1989 a larger number of representative goods were used than in the earlier indices. The material cost index was calculated on the basis of gross prices excluding VAT. The material costs excluded masters fee and other profits. The labor cost index was calculated on the basis of price lists in the different construction trades.

The material cost index in the former construction cost index from 1987 was calculated on the basis of list prices and gathered information on producer prices deducted general discounts. The calculation of labor costs was made on the basis of collective agreement wages including compulsory employers' contributions. The former index is comparable with the indices from 1968 and because of the parallel calculation of the indices in the period from 1987 to 1989 it is possible to regulate contracts back to 1968.

In 2003 the Construction Cost Index for residential buildings was established. The material cost index in this index is calculated on the basis of prices collected from the Price Index for Domestic Supply where both general and specific discounts are deducted. The labor cost index was calculated on the basis of the Indices of Average Earnings for the Private Sector, which contained information on each employees earnings etc.

In 2016 the weights for the Construction Cost Index were updated so that 2015 =100. The index still follows the same principles as the index in 2003, but now uses the implicit indices of average earnings to calculate labor costs.

### Coherence - cross domain

*Implicit index of average earnings:*
Methodologically, the calculations of the labor cost indices are now more similar to the calculation of the Implicit index indices of average earnings, also performed by Statistics Denmark, than previously. I.e., the wage indices are now calculated across all types of employments in the construction industry and not just employments linked directly to the construction process. This makes the indices more comparable to the index of average earnings for the construction sector than previously. As with the index of average earnings for the construction sector the wage indices for the Construction cost index are now calculated at company level rather than employee level, as was the case up until now. This makes the indices more robust to changes in employments. Furthermore, the basis for calculation is more comparable between the labor cost indices and the indices of average earnings, as they now apply the same data editing procedures.

*Producer prices indices for commodities and services:*
The construction cost index uses prices from the Price index for Domestic Supply (PRIS1115) and Producer price index for services (PRIS1515), which are both published by Statistics Denmark. They describe the development of prices of commodities and services between businesses, and for commodities produced in Denmark for domestic supply. For further information please refer to the relevant documentations of statistics.

*Producer price index for construction of dwellings:*
The construction cost index is related to Producer price index for construction of dwellings (PRIS90), which is also published by Statistics Denmark. Producer price index for construction of dwellings describes the quarterly development in the price of a newly built one-family house, that is the price of purchase. The index is based on sales prices from housing companies. For further information please refer to the relevant documentations of statistics.

### Coherence - internal

Not relevant for these statistics.