Construction Cost Index

Construction Cost Index - The Construction Cost Index is a quarterly indicator published by the Federal Statistical Office that tracks price trends for construction services in residential building. It shows how the costs of materials and labor wages have changed compared to a base year. In real estate valuation, the Construction Cost Index is used to convert historical construction costs to current prices.

Structure and Calculation

The Construction Cost Index is calculated by the Federal Statistical Office (Destatis) as a Laspeyres index and comprises two components:

• Material costs: Prices for building materials such as concrete, steel, wood, insulation materials, tiles, and installation materials
• Labor costs: Wages and non-wage labor costs for the trades involved in construction

The current base year is 2021 (= 100). The index is reported separately for different building types-residential buildings, office buildings, commercial buildings, and road construction. For real estate valuation, the index for conventionally constructed residential buildings is primarily relevant.

In addition to the Federal Statistical Office, the German Insurance Association (GDV) also publishes a construction price index specifically developed for adjusting building insurance coverage amounts-the so-called Construction Price Index 1914. This serves as the basis for the sliding replacement value factor in residential building insurance.

Significance in Real Estate Valuation

In the asset value method, the construction costs of a building are determined based on standard construction costs (NHK 2010) and extrapolated to the valuation date using the construction cost index. The formula is:

Current construction costs = NHK × Gross floor area × (Current construction cost index ÷ Construction cost index for the NHK base year)

Calculation example - Single-family home in Nuremberg-Erlenstegen:

Valuation parameter	Value
Building type	Single-family home, medium standard of finish
Gross floor area (GFA)	180 m²
NHK 2010 (base price)	€1,050/m²
Construction cost index, NHK base year (2010)	78.4
Current construction cost index (2024)	131.2
Indexation factor	131.2 ÷ 78.4 = 1.673
Indexed construction costs	180 × 1,050 × 1.673 = €316,197

Without indexation, the appraiser would estimate construction costs at €189,000-a difference of over €125,000, which would massively underestimate the property’s value.

The construction cost index is thus an indispensable tool for appraisers, banks, and insurers. Building insurance companies also use the index to adjust the sum insured-the so-called sliding replacement value factor is derived from the construction cost index and ensures that the sum insured automatically rises in line with construction price trends.

Impact on Insurance Coverage

The construction cost index is particularly relevant for owners with outdated insurance policies: Anyone who has not correctly adjusted the sum insured for years risks real underinsurance. In the event of a claim-such as a total loss due to fire-the insurance company would reimburse only a fraction of the actual replacement value. The underinsurance ratio is calculated as follows:

Reimbursement = Sum Insured ÷ True Replacement Value × Amount of Damage

With a true replacement value of 400,000 euros, an outdated sum insured of 280,000 euros, and damage amounting to 80,000 euros, the insurance company would reimburse only 56,000 euros (70%). Insurance with floating replacement value (Section 93 VVG) eliminates this risk, provided the original sum insured was correctly determined.

Development and Current Situation

Period	Construction Cost Index Trend	Main Causes
2010-2019	+25% (moderate)	Economic cycle, skilled labor shortage
2020-2021	+8%	Supply chain disruptions, pandemic
2021-2022	+17%	Energy price shock, wood/steel shortages
2022-2023	+6%	Lingering effects, wage negotiations
2023-2024	+2% (cooling off)	Decline in demand, normalization
Total 2021-2024	+30%	Historically unusual

Since 2023, the momentum has cooled off somewhat, but construction costs remain at a significantly higher level than before the pandemic. Stricter energy requirements under the Building Energy Act (GEG) have also structurally increased construction costs-a single-family home built to current GEG standards costs approximately 10-15% more to construct than a comparable building from 2018.

Practical Tip for Property Owners in Nuremberg and Franconia

We recommend that property owners in the Nuremberg metropolitan region keep an eye on the construction cost index when planning renovation projects and reviewing their building insurance. Check annually to ensure that your insurance provider’s sliding replacement value factor reflects the current index. Many insurance companies automatically adjust the coverage amount-but only if the original base value was correct. A base amount set too low will remain insufficient despite index adjustments.

When planning renovations, we recommend obtaining current construction quotes and not relying on outdated cost estimates. A contractor’s quote from 2019 is no longer meaningful today given the rise in the construction cost index. In the Nuremberg region, contractor capacity remains heavily utilized; based on experience, quoted prices for renovation work are 15-25% above the national average. Anyone purchasing a property with planned renovation needs should obtain current quotes before negotiating a purchase price.

Frequently Asked Questions

Where can I find the current construction cost index?

The construction cost index is published quarterly by the Federal Statistical Office on destatis.de, broken down by building type and trade. The GDV Construction Price Index for insurance purposes (base year 1914) is available directly from the GDV. In addition, the state appraisal committees and many expert associations publish processed index values. Many real estate appraisers rely on the annually updated NHK tables, which already incorporate the index. For insurance purposes, we recommend asking your insurance company directly about the factor they use.

Why have construction costs risen so sharply in recent years?

The rise in construction costs since 2021 has several causes: disrupted supply chains due to the COVID-19 pandemic, sharply rising energy prices, material shortages of wood, steel, and insulation materials, as well as the structural shortage of skilled workers in the construction industry. In addition, the stricter energy requirements of the GEG have permanently increased construction costs. In the Nuremberg metropolitan region, regional factors also play a role: The high level of construction activity in recent years has placed a heavy strain on the capacity of local tradespeople, leading to above-average bid prices. Since 2023, the rate of increase has slowed, but a return to pre-crisis levels is not expected.

How does the construction cost index affect my insurance coverage?

Homeowners insurance with a sliding replacement value adjusts the sum insured annually based on the construction cost index. This keeps the insurance coverage up to date without the owner having to manually increase the sum. A prerequisite is that the original value was determined correctly-a starting sum that is set too low will remain too low despite index adjustments. We recommend verifying the living area, standard of finish, and any additions or renovations with your insurance provider. In case of doubt, the correct insured value can be re-determined by an appraiser or using the “Wert 1914” form.

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