RIGA - The wages of construction workers in Latvia have skyrocketed 59 percent over the past year, the Estonian construction group Merko Ehitus said in its report for the first nine months of 2006. Rapidly increasing volumes have affected the availability of workers and building materials, and have also boosted the rise of construction costs, the report said.
As compared with Q3 in 2005, construction costs increased by 26.5 percent in Latvia, 11.2 percent in Estonia and 10.0 percent in Lithuania, which includes labor cost increases of 20.4 percent and 58.9 percent in Estonia and Latvia, respectively.
"The restricted availability of employees and building materials, together with [Latvia's] rapid price increase, provides a challenge to the future development of the construction sector. As rapid growth contributes to the sector's instability, it also increases the risk of extraordinary costs," Merko said.
"In the medium- to long-term forecast, increasing construction costs, which exceed purchase and investment capacity, may have a negative effect on demand and are likely to hinder the sector's growth. However, in the near future, demand will exceed supply and the construction sector's growth will continue," the report said.
According to figures by the national statistics offices of the Baltic states, the construction market in the first half of this year grew 41.3 percent in Estonia, 35.6 percent in Latvia and 31.7 percent in Lithuania when measured in constant prices. A continued increase in construction costs accounted for the majority of the growth.
