Troostwijk Index 2024 (NL)
Inisghts & Publications
Jan 2, 2024
In this year's Troostwijk Index 2024, we provide insights into the price trends for commercial buildings, office spaces, residential properties, and business inventory. Our index figures offer guidance for updating insured values for the upcoming year.
General developments
The year 2023 has been another turbulent one, marked by significant fluctuations. Energy prices saw a sharp decline, while the raw materials and materials markets remained volatile. At the same time, wage growth reached its highest level in years. Notably, the predictions made at the close of 2022 did not fully materialize. We had anticipated that high prices for energy, raw materials, and materials would persist into the second half of 2023. However, by the second quarter, energy prices began to drop, and the prices of materials and raw materials stabilized, with some even decreasing.
Looking ahead to 2024, we expect construction and production costs to rise, primarily driven by increasing wage costs. Material and raw material prices are likely to experience more modest, long-term increases. However, it’s important to note that uncertainty remains high, with geopolitical developments potentially causing sharp price hikes in energy, materials, and raw materials.
For clarity, the Troostwijk Index reflects long-term cost developments and aims to filter out cyclical influences or price spikes caused by geopolitical events.
Energy, raw materials and materials
Energy prices experienced a steep decline throughout 2023. Despite this, prices are still significantly higher than early 2021 levels. For example, the price per cubic meter of natural gas is more than twice what it was in early 2021, and the price per kWh of electricity remains nearly three times higher (Source: CBS). Short-term declines are unlikely, as the gas now being purchased is considerably more expensive than before, even though the Netherlands has reduced its reliance on Russian gas.
The price of crude steel and other metals fell sharply in early 2023 due to waning global demand, resulting in a 15% decline. However, by the end of 2023, prices began to rise again. While steel prices remain higher than pre-2021 levels (around 37.5%), we anticipate that, with the absence of a strong economic recovery, prices will stabilize or increase slightly in 2024. The oil price showed considerable volatility in 2023. After a 10% drop in the first half of the year, it surged by 25% in Q3 due to production restrictions by oil-producing nations. Following this peak, prices dropped again, fueled by disappointing export figures from China. With global economic recovery remaining sluggish, we expect continued volatility in oil prices throughout 2024.
As for building materials, 2023 presented a mixed picture. Materials influenced by international competition, like timber, remained relatively stable after substantial price hikes in previous years, while those primarily produced in the Netherlands, such as concrete and cement, saw price increases following the surge in energy and wage costs. Steel products like beams and profiles saw prices decline, but this trend leveled off toward the end of the year. Looking at 2024, we expect a stable-to-slightly-higher price trend for internationally competitive building materials, while domestic materials may face price pressure due to construction stagnation.
Wage costs
Following a substantial wage increase in 2022-2023, wages are expected to rise again in 2024, though at a slightly lower rate. The latest forecast from the CPB suggests a 5.6% increase in collective labor agreement wages for 2024 (down from 6.8% in 2023). Wage demands vary by sector, with the construction industry expecting a substantial increase of around 10% (or even 14% with allowances and extra days off). In other sectors, like Metal & Electrical, wage demands are expected to align more closely with the national average, as their increases in 2022-2023 were already above average. For the purpose of our index calculations, we’ve assumed a 7% wage increase in construction and a 5.6% increase in other sectors. This wage development will be applied in two stages: half of the increase will be reflected in mid-2024, with the other half coming into effect on January 1, 2025.
Uncertainty
The period ahead remains highly uncertain. Critical questions include whether gas supplies will be sufficient during a harsh winter, how the conflict in Ukraine will evolve, and the potential impact of geopolitical tensions between China and the West on raw material prices. Additionally, climate factors, particularly extreme weather events, could influence raw material availability, such as timber production.
In 2023, new home construction dropped sharply, as higher interest rates, economic uncertainty, and declining house prices led to hesitancy among potential buyers. The commercial construction sector also saw reduced activity, contributing to lower construction material prices. While some anticipate a recovery in construction in 2024, the Economic Institute for the Construction Industry forecasts a decline of 1.5%. Any sudden shifts in the economic climate could lead to price increases.
In these volatile times, indexation is more important than ever. The Troostwijk Index is a broad-based indicator and may not reflect specific market trends for particular real estate sectors. Therefore, it's important to stay updated on price developments in specific submarkets, allowing you to adjust your index if needed. If you're unsure about value developments, feel free to contact Troostwijk Research for personalized advice.
The figures presented here offer a forecast of expected price trends for the coming year. To stay informed about actual developments, be sure to check our quarterly updates.
Index numbers
As you can see from the tables below, the actual development of construction costs and production costs of business inventory in 2023 has lagged behind our forecast at the end of 2022. For 2024, we will therefore make a correction for the excessive indexation in 2023. This results in a constant annual index figure for construction costs and a slightly higher index figure for the production costs of business inventory. The quarterly index figures show that we do indeed expect an increase in construction costs and production costs for business inventory. As already mentioned above, this is mainly driven by higher wage costs.
Forecast annual index figures
| 2023 | 2024 | % | |
|---|---|---|---|
| Commercial and office buildings | 130.0 | 130.0 | 0% |
| Homes | 128.7 | 128.7 | 0% |
| Company inventory | 126.4 | 126.8 | +0,3% |
Forecast quarterly index figures 2024
| 2023 – IV* | 2024 – Yo | 2024 – II | 2024 – III | 2024 – IV | |
|---|---|---|---|---|---|
| Commercial and office buildings | 125.2 | 125.3 | 125.4 | 129.7 | 130.0 |
| Homes | 123.3 | 123.6 | 123.9 | 128.3 | 128.7 |
| Company inventory | 123.3 | 124.5 | 125 | 126.4 | 126.8 |
