Home > Statistics > Building cost index > Concepts and definitions

Concepts and definitions

Building cost index

The building cost index is an index of input prices that describes development in the prices of factors of production, materials, wages and salaries and other inputs of building trade relative to the average price level of a base year.

Building trade

Building trade refers to commercial building against payment. Cf. Independent building.

Cost index

The cost index describes cost changes caused to entrepreneurs from acquisition of inputs for a contract or an assignment.

Costs are accrued by own labour input and various products and services bought. Cost indices are sometimes also referred to as input indices.

The cost index describes changes in prices of cost factors relative to the selected base year. Cost indices are calculated with a method where different cost factors are weighted together by their proportions of total costs. The Laspeyres calculation index formula is used in the calculation, whereby the weights are from the base year.

Statistics Finland produces cost indices for building construction and civil engineering, earth movers and forest machinery, rail, taxi and ambulance transport.

Independent building

Independent building refers to building projects undertaken by households themselves, which include new and renovation building of single-family houses, free-time residences, agricultural buildings and other domestic utility buildings without paid labour. Cf. Building trade.

Index

An index is a ratio describing the relative change in a variable (e.g. price, volume or value) compared to a certain base period (e.g. one year). The index point figure for each point in time tells what percentage the given examined variable is of its respective value or volume at the base point in time. The mean of the index point figures for the base period is 100.

Input of supplies

Inputs of supplies describe development in the prices of supplies and material used in the construction industry relative to the price level of a base year. The prices are monitored with an inquiry conducted among producers, wholesalers and retailers of building supplies.

Labour input

Labour input describes development in the cost of labour in the construction industry relative to a base year. It is monitored against average hourly earnings for regular working hours in the construction industry, indirect labour costs complying with collective agreements, and estimated development of earnings.

Other inputs

Other inputs comprise data on the prices of services that are not directly associated with building construction. Some of them relate to building contracting and some to the overhead costs of building sites. Data on the costs of transport, machine works and lift installations are collected by monitoring subcontracting costs.

Point figure

Point figure is a change quantity used in price indices, which expresses the price, average price or index of the comparison period relative to the price, average price or index of the base period. The point figure of the base period is usually denoted by the number hundred. For example, if the point figure for a commodity at a certain point in time is 105.3, it means that the price of that commodity has risen by 5.3 per cent from the base period.

Transfer price coefficient

Transfer price coefficients are calculated from changes in the building cost index. They are used in calculating compensations paid in transferring shares in a tenement building of a joint-stock property company or housing company or the maximum price of a tenement building financed with a long-term renovation loan.

The coefficient is calculated using the currently valid building cost index. Building cost indices of different years have their own product selections and weight structures. This ensures that the index measures correctly the structure of building costs prevalent at each point in time.

Weight structure

Describes what meaning each sub-index (commodity, employee group, etc.) belonging to the index has for total index.