Statistics Denmark

Prices and Consumption, Economic Statistics

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The construction cost index for residential buildings is a quarterly index delineated by labor costs, material costs and equipment costs for a typical residential building in Denmark. The published indices reflect costs in comparison to a reference period (2015), and therefore do not illuminate the actual cost levels. The index is delineated for a one-family house and a multi-family house, in addition to an index for the total. The index is further delineated into seven sub-indices by profession and six sub-indices by building parts as well as material costs and labor costs.

The index encompasses costs incurred when raising a residential building, i.e. costs of labor, equipment and materials for the entrepreneur. However, costs associated with the plot, architect, etc. are not included the computation of the construction cost index.

The index shows a quarterly change in construction costs for residential buildings and is calculated on the basis of a fixed basket of commodities. Thus, the construction costs are associated with the same type of residential building. The composition of the index is based on an analysis of actual constructions of residential buildings, using information obtained primarily from the Dwelling- and Housing Register (BBR).

The weights used in the construction cost index for residential buildings are based on business accounts from three actual residential buildings: a one-family house, a terraced house and a multi-family house. The business accounts are collected from three entrepreneurs of different sizes and geographic location. During the processing of this data, an engineer specialized in pricing of residential buildings has been consulted. The collected information is processed so that each construction part, e.g., the mounting of a concrete wall element, is specified by materials, in this case concrete, by equipment, e.g., building crane, and by type of labor, e.g., concrete element work, that is required, and the associated costs.

Approximately every fifth year the three types of residential buildings are assessed on the basis of their relevance as representing the typical residential building in question. The weights were last updated as of the 1st quarter 2016 where both the weighting- and reference periods were changed to 2015.

Labor costs cover wages and salaries, in addition to other social benefits covered by the employer. In the construction cost index for residential buildings, labor costs cover the compensation of employees that constitute the total earnings of employees. The total earnings includes the employee's wages and salaries paid by the employer including pension contributions by the employee and the employer to the employee. The remaining parts of the labor costs include those costs associated with the employee-employer relation, which does not have the character of direct earnings for the employee, i.e. social contributions from public funds, education costs, voluntary personnel costs, etc.

Material costs cover all costs from materials and equipment. Up to April 2004 material and equipment costs were calculated on the basis of actual prices paid by producers/ importers excl. VAT. This means that the prices used were net of discounts of the actual sale of the materials or equipment. As of April 2004, the prices collected are the importers' purchasing price c.i.f. (i.e. including cost, insurance and freight) excl. taxes and fees, instead of the final sales prices that were collected previously.

The division into building parts is based on the Danish classification of building elements; SfB Bygningsdeltavlen.

The division into profession components is based on the different costs associated with the respective building trades.

Costs associated with organization and operation of construction sites have been distributed equally between the different profession components and building parts.

The construction cost index for residential buildings can be grouped by housing types, professions, building parts, fixtures, as well as material and labor costs.

The index can be subdivided by housing types: one-family houses; multi-family houses; residential buildings in total (one-family houses and multi-family houses).

The index can be subdivided by professions:

• Earth and concrete work
• Concrete slab work
• Bricklaying
• Carpentry and joinery (in indices from prior to 2015, this profession is divided into separate professions Carpentry and Joinery)
• Painting
• Heating and sanitary engineering
• Electrical work

The division of professions are based on the relevant profession that are included in the labor costs and are classified by DISCO-08. The industries that information are collected from are determined by the industry code DB07.

The index can be subdivided by building parts:

• Subgrade
• Raw buildings
• Completion of buildings
• Surfaces
• Heating and sanitary installations
• Electrical and mechanical installations

Labor costs and material costs are not subdivided further.

The construction sector.

Labor Costs: The price concept of labor costs is the actual earnings plus other labor costs, including employers' payments of social contributions. Only the labor costs of persons directly involved in the construction process are included.

Building part index: The indices for one-family house, multi-family house, and residential buildings in general are divided into subindices for professions and building parts. Each are further divided into materials and labor costs. The following building parts indices are included:

• Subgrade
• Raw buildings
• Completion of buildings
• Surfaces
• Heating and sanitary installations
• Electrical and mechanical installations

Costs associated with organization and operation of construction sites have been distributed equally between the different profession components and building parts.

Profession index: The indices for one-family house, multi-family house, and residential buildings in general are divided into subindices for professions and building parts. Each are further divided into materials and labor costs. The following profession indices are included:

• Earth and concrete work
• Concrete slab work
• Bricklaying
• Carpentry and joinery (in indices from prior to 2015, this profession is divided into separate professions Carpentry and Joinery)
• Painting
• Heating and sanitary engineering
• Electrical work

Costs associated with organization and operation of construction sites have been distributed equally between the different profession components and building parts.

Material prices: The concept of material prices for imported commodities is actual transaction prices c.i.f. excluding all duties and taxes on the goods. For commodities for the home market the concept of material prices is actual transaction prices ex producer, excluding VAT and excise duties, and taking both general and specific discounts into consideration.

Weights: Weighing of different cost units in the construction cost index is based on accounting data from three actual building constructions: One one-family house, One semi-detached house, One multifamily house. The buildings were chosen as representation of typical housing constructions on the basis of an analysis of actual housing constructions during the weight reference period.

The data for the three types of buildings are obtained from contractors of different size and geographic location. A consulting contractor specialized in pricing of housing construction was involved in the processing of the data.

Costs.

The indices represent the construction of residential buildings in all of Denmark.

Denmark.

2003-

2015=100.

Index values and percentage change.

The construction cost index for residential buildings is compiled quarterly, i.e. the relevant index number is representative for average costs in the relevant quarter.

 The legal authority for data collection is provided by section 8, paragraph 1 of the Act on Statistics Denmark, cf. Executive Order no. 610 of 30 May 2018.

Not applicable

All statistics in Statistics Denmark follow the protocol for Information security and data confidentiality.

For the construction cost index for residential buildings only aggregated indices are published, thus discretion does not apply to this statistic.

The publication date appears in the release calendar. The date is confirmed in the weeks before.

The Release Calender can be accessed on our English website: Release Calender.

Statistics are always published at 8:00 a.m. at the day announced in the release calendar. No one outside of Statistics Denmark can access the statistics before they are published.

Quarterly.

Danish news release for construction cost index for residential buildings.

Publications only in Danish.

The statistics are published in the StatBank in the following tables:

• BYG32: Construction cost index for residential buildings by main index, kind and unit (yearly)
• BYG42: Construction cost index for residential buildings by main index, sub index, kind, unit and time (quarterly)
• BYG52: Construction cost index for residential buildings by main index, sub index, kind, unit and time (yearly)

Historical statistics can be found here: - BYG4: Construction cost index for residential buildings by main index, sub index, kind, unit and time (quarterly, 1986Q4-2015Q4) - BYG5: Construction cost index for residential buildings by main index, sub index, kind, unit and time (yearly, 1987-2015)

Basis material is stored in a register. The system for calculating the indices is constructed so that it is possible to produce special indices. The basis in the system is the BC/SfB-Building Board, and within the framework of this Board there are vast opportunities of constructing special customised indices: Examples are:

• Index for a specific building part
• Index for one of the three buildings
• Index for other kinds of buildings, i.e. office buildings and universities

The Construction Cost Index for Residential Buildings is transmitted to Eurostat on a quarterly basis in accordance with EU Council regulations (EC) 1165/98 of May 19th. 1998, and 588/2001 of May 26th, 2001. Subsequently, there have been various regulations that have further introduced new aspects, which are now being merged and replaced by Regulation (EU) 2019/2152 of the European Parliament and of the Council of 27 November 2019.

A further description of the method used is available in: The publication "Bygge- og anlægsvirksomhed" (Construction industry) which appears in the series "Statistiske Efterretninger"* (Statistical News) no: "2003:33."

Results from the quality evaluation of products and selected processes are available in detail for each statistics and in summary reports for the Working Group on Quality.

Statistics Denmark follows the principles in the Code of Practice for European Statistics (CoP) and uses the Quality Assurance Framework of the European Statistical System (QAF) for the implementation of the principles. This involves continuous decentralized and central control of products and processes based on documentation following international standards. The central quality assurance function reports to the Working Group on Quality. Reports include suggestions for improvement that are assessed, decided and subsequently implemented.

Overall the Construction Cost index for residential buildings is assessed to be of high quality and representative of the construction of residential housing in Denmark. The weight basis for the index is based three housing constructions: a one-family house, a terraced house and a multi-family house. They were chosen through a thorough analysis of typical residential, housing constructions in Denmark in the weight reference period (2015). Every five years the weight basis is updated in order to reflect the contemporary state of housing construction.

It is not possible to specify the total error related to the of the index. The gathered price data is continuously monitored in order to raise the data quality. This may include substitution or addition of reporting companies, changes in the reported products, or changes in applied price definitions and calculations. Running dialogue is carried out with involved companies to prevent misunderstandings and reporting errors.

In order to minimize errors, the index is calculated in a dedicated computerized pricing index system.

In general, it is assessed that the error margin is highest at the most detailed, least aggregated index levels, and drops at less detailed, more aggregated levels. The on-going monitoring and improvement of the quality of both incoming data and the weight basis means that the Construction Cost index for residential buildings is assessed to be of high quality and representative of the construction of residential housing in Denmark

The construction cost index has two primary purposes. The index is used for contract regulations and to follow the economic development in construction costs. The primary users of this index are construction organizations, entrepreneurs, housing developers, professional craftsmen, solicitors, public institutions and the EU.

The index is also reported to Eurostat as part of domestic indices construction costs for residential buildings

No information is collected on user satisfaction. However, biannual feedback meetings are held with central index users, who are encouraged to provide suggestions or critique on the state of the index.

The statistics fulfill the demands set by Eurostat.

Calculation of the Construction cost index for residential buildings is based on the assumption that three chosen housing constructions are valid representations of the actual costs of constructing a house in Denmark. The three houses were chosen on the basis of an analysis of actual constructions of residential buildings, using information obtained primarily from the Dwelling- and Housing Register (BBR). In the case of significant changes to how houses are typically constructed the accuracy of the index could be affected.

The index is based on the development of about 200 representative goods, which cover about 20 work functions, about 52 material groups and about 10 equipment groups. Each representative good is linked to a number of prices. It is not possible to determine sampling accuracy, as prices are not collected randomly. However, representative goods are chosen on the basis of the costs of three actual, typical housing construction projects, using principles of importance and representation. It is therefore assumed that price developments of the collected sample prices are representative of price development in actual housing constructions.

Continuous monitoring and improvement of the quality of pricing data and weights means that the index is evaluated as being of high quality and representative of the general development of house building costs in Denmark.

The index is based on the development of about 200 representative goods which cover about 20 work functions, about 52 material groups and about 10 equipment groups. To each representative good a number of prices/goods are attached. It is not possible to determine sampling accuracy, as prices are not collected randomly. However, representative goods are chosen on the basis of the costs of three actual, typical housing construction projects, using principles of importance and representation. It is therefore assumed that price developments of the collected prices are representative of price development in actual housing constructions.

The Price index for Domestic Supply, from which most of the prices used in the Construction cost index for residential buildings are gathered, uses a top-down principle by which a minimum of 70 pct. of the Danish production and import is covered. The used samples are therefore considered to be representative of actual price developments. Because reporting companies are not selected randomly it is not possible to measure the sample error. A source of error may be if prices of relevant goods that are not included in the index differ significantly from prices of included goods.

The sample used in the implicit indices of average earnings includes a large proportion of the total population, i.e. by inclusion of all companies with more than 100 employees. Therefore, the statistical error may be higher for industries that consist of many smaller businesses.

The three house constructions that the Construction cost index for residential buildings is based were chosen on the basis of an analysis of actual housing constructions in 2015, using information obtained primarily from the Dwelling- and Housing Register (BBR). They were chosen to ensure a representative basis for calculations of the index. Therefore, the Construction cost index for residential buildings is based on the assumption, that the chosen buildings represent typical constructions of single- and multifamily buildings in Denmark. This also means, that the index may be less representative of housing projects that are distinct, architecturally or otherwise, from typical housing projects.

In the case of significant changes to how houses are typically constructed the accuracy of the index could be affected. This is addressed by updating the base weights approximately every five years.

The construction cost index for residential buildings is based on a fixed basket of products. However, in real life companies may substitute what products they use, e.g. due to pricing differences for similar products, due to company preferences, or because of technological advances. This may lead to the index diverting from actual cost developments. To accommodate this, Statistics Denmark is in running contact with reporting companies about the relevancy of their reported products. Substitution of the products used in the index may lead to changes in product quality, which is addressed by continuous quality corrections.

Errors may occur during registration of prices and labor costs by reporting companies or at Statistics Denmark. However, both manual and computerized inspections of such errors are performed, and is therefore not considered to be a significant source of error.

Missing price reports are found to be less than 1 pct. per index period. Missing prices are mostly estimated by a continuation of the last reported price. In the case of essential products, prices may be imputed. In cases where the price is unchanged over a period of 13 months, the sources are contacted to investigate if their reporting is erroneous.

Calculation of the Construction cost index for residential buildings is done by computer in a dedicated price index system. The likelihood of calculation errors is therefore inconsiderable.

It is assumed that developments of the prices used in the Construction cost index for residential buildings are accurate and representative of actual price developments for relevant product groups. The products used in the index have not been chosen specifically for use in the index, but it is assumed that these products are representative of materials used in the construction of dwellings.

The construction cost index for residential buildings is published primo March (quarter 4), primo June (quarter 1), primo September (quarter 2) and primo December (quarter 3). Yearly statistics are published once per year in connection with publication of the 4th quarter.

The statistics are generally published without delay in relation to the scheduled publication date.

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.

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.

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.

Not relevant for these statistics.

There is a miniscule direct response burden since the majority of the data used in production are obtained from other statistics in Statistics Denmark.

For information about how the prices used in the Construction cost index for residential buildings are reported, users are referred to the documentations of statistics for Producer and Import Price Index for Commodities and Producer Price Index for Services.

Statistics Denmark revises published figures in accordance with the Revision Policy for Statistics Denmark. The common procedures and principles of the Revision Policy are for some statistics supplemented by a specific revision practice.

Only final statistics are calculated and published. Revisions are only performed if errors are detected in already published values.

Most data used in the construction cost index for residential buildings is gathered from other statistics at Statistics Denmark. Prices of materials and equipment are collected from the Price Index for Domestic Supply. Around 950 different material prices are collected every month from producers and importers, cf the documentation of statistics for Producer and Import Price Index for Commodities. Prices are also gathered from Molio Prisdata.

Prices of transportation are collected quarterly from the Producer price index for services, from which prices of Freight transport by road and removal services are used.

The prices of total labor costs are mainly collected from the implicit indices of average earnings. The prices are collected each quarter and refer to the second month of the quarter, cf the documentation of statistics for Implicit index of average earnings.

Weighing of different cost units in the construction cost index is based on three concrete buildings: One one-family house, one semi-detached house, and one multi-family house. The buildings were chosen as representation of typical housing constructions on the basis of an analysis of actual housing constructions during the weight reference period (2015), primarily on the basis of the Dwelling- and Housing Register (BBR) . The data for the three types of buildings are obtained from contractors of different size and geographic location. A consulting contractor specialized in pricing of housing construction was involved in the processing of the data.

Primarily monthly and quarterly. Some prices are only gathered on a yearly basis.

Most prices used in the calculation of the index are three-month averages for the price of materials or services on the 15th day of each month in the quarter. If the price of a material or service on the 15th day cannot be gathered, the price is gathered from a suitable day earlier in the month, or an average of prices in the first 15 days of the month is used. The three-month average price is considered representative for the entire quarter.

Material prices are collected for the Price Index for Producer and Import Price Index for Commodities (PPI) via Virk, and are reported by select, representative companies. The Construction Cost Index for residential buildings uses PPI-prices belonging to NACE Rev. 2 Section F. There are about 950 material prices forming about 120 representative material goods. Furthermore, some material prices are gathered manually from Molio Prisdata. Prices representing freight transport are gathered from the Producer price Index for Services, and are also collected via Virk.

Labor Costs are collected for the implicit indices for average earnings. These data are collected from IT-systems used by reporting companies to administer employee salaries on an individual level. The data is mostly reported system-to-system, e.g. bulk data from dedicated salary IT-systems reporting on behalf of their clients to Statistics Denmark. Companies that have their own salary IT-system report data either by upload via a web application or by sending encrypted files via email to a dedicated email address. The Construction Cost Index uses earnings for NACE Rev. 2 Section F.

The data validation is handled by the Price Index for Domestic Supply and the implicit indices of average earnings. The first validation of price data happens when prices arrive. Here they are tested for unusual changes. Prices that do not pass fixed threshold values will be checked manually by the staff and accepted only if the companies can verify the change.

When all prices are received, the system generates a list that includes all price changes and a measure of how these affects the elementary aggregates. The last validation is a visual inspection of all index tables.

The Construction cost index for residential buildings consists of a hierarchical system, where the collected prices are first divided into a number of product groups. The groups are aggregated to base aggregates from which base prices are calculated as geometric averages. Base prices are used to calculate base indices, which show the development of base prices in successive time periods. Base indices constitute the most detailed index level. On the basis of base indices, aggregated subindices are done using Laspeyres type index calculations. Finally, aggregated total indices are calculated, which are the top level of the index hierarchy.

Pricing weights in the Construction cost index for residential buildings are based on classification codes and weights for the different types of housing constructions. While product prices are updated quarterly, weights are updated approximately every five years.

Weights of different cost units in the construction cost index are based on accounting data from three actual building constructions: One one-family house, one semi-detached house, one multi-family house. The buildings were chosen as representation of typical housing constructions on the basis of an analysis of actual housing constructions during the weight reference period (2015), based primarily on data from the Dwelling- and Housing Register (BBR). The data for the three types of buildings are obtained from contractors of different size and geographic location. A consulting contractor specialized in pricing of housing construction was involved in the processing of the data.

The accounting data used is comprised of different production parts, e.g., assembly of a concrete wall, which is divided into costs of involved materials (e.g., concrete), equipment (e.g., crane), and profession (e.g., concrete slab work). This is the basis of price weights. Costs of usage and operation of construction sites, including winter specific measures, are distributed proportionally to the different professions and materials.

Substitution of the products used in calculation of the index may occur over time. Because such new products may be of a different quality than the previous, continuous quality control of is performed.

No other data corrections are carried out, except for the methods described in the data validation section.

Further information on the Construction cost index for residential buildings can be found on the subject page or can be obtained by contacting Statistics Denmark, Prices and Consumption.