Construction cost inflation impacts in Bali property development: 2022 to 2025
Building Material Cost Increases in Indonesia (2022 – 2025)
Indonesia experienced a notable surge in construction material costs in late 2022, followed by a stabilization and modest growth through 2023 into early 2025. The Wholesale Price Index for construction materials (IHPB Bahan Bangunan/Konstruksi) jumped about 6.9% year-on-year in 2022, then cooled to only 0.54% YoY by Dec 2023. This reflects how prices of key inputs spiked in 2022 (driven by post-pandemic demand and global inflation) and then leveled off. The chart below illustrates this trend, showing the wholesale price index rising sharply in 2022 and flattening in 2023:
Wholesale Price Index (IHPB) trends for Indonesia (2018=100 base). By August 2023, overall wholesale construction costs were up 3.72% YoY, with construction materials up 2.13% YoY. The index surged in late 2022 and then grew more slowly through 2023.
Price Changes by Major Material (Aug 2022–Present)
• Cement: Cement prices rose dramatically in 2022, as producers implemented multiple price hikes. Major cement firms raised average selling prices three times during 2022, causing >30% increase in retail cement prices. This was largely due to soaring coal costs (coal fuels ~35–50% of cement production costs). To illustrate, Indonesia’s coal benchmark spiked 78% in 2022, which heavily pushed up cement’s cost of goods. Government policy did cap coal prices for domestic cement plants at US$90/ton (well below market) to contain costs, but cement still saw double-digit inflation. By early 2023, with coal prices easing, cement price growth moderated – producers targeted roughly +5% price increases in 2023 and again in 2024. Indeed, by late 2023 cement prices had stabilized. BPS data show only a 0.02% drop in cement price in September 2023 (m/m), reflecting that cement costs plateaued after the 2022 jump. Overall, from August 2022 to early 2025, cement prices are roughly 35% higher (most of that from the 2022 surge), with recent changes in the low single digits.
• Steel (Rebar and Structural Steel): Steel reinforcement bar prices have been volatile. In early 2021–2022, construction steel costs shot up in Indonesia, echoing global trends. Local steel retailers reported 20–30% increases in steel prices by early 2021–2022 , driven by high international iron ore prices and post-COVID demand. By August 2022, steel prices were near peak levels after the Russia-Ukraine war sent global steel and scrap prices soaring in H1 2022. However, in late 2022 and through 2023, steel prices corrected downward as global supply improved and demand cooled. Indonesia’s wholesale index for steel reflected this softening. For example, reinforcing bar prices fell 0.37% in September 2023 (m/m), and by end of 2023 steel was cheaper than a year prior. Overall, from Aug 2022 to present, rebar and structural steel costs are roughly flat or slightly lower (after the earlier run-up). The net change masks the pattern of a sharp run-up through mid-2022 followed by a decline in 2023. Builders thus got relief in 2023 as steel costs came down from their highs.
• Bricks: Brick prices have remained relatively stable with mild fluctuations. In 2022, brick and block costs inched up a few percent (owing to higher fuel costs for kilns and increased labor costs), but nothing as dramatic as cement or steel. Through 2023–2024 brick prices have seen little change. According to BPS/CEIC data, the wholesale price index for bricks stood at 98.95 (2023=100) in Jan 2025, down slightly from late 2024 . This indicates about a 1% decrease in brick prices in early 2025 compared to the 2023 baseline. Essentially, brick costs rose modestly in 2022 then leveled off; supply (largely domestic production) kept pace with demand.
• Lumber (Timber): Lumber for construction (framing wood, plywood, etc.) experienced moderate price swings. Globally, lumber saw extreme volatility – for instance, U.S. lumber prices jumped over 20% year-on-year by early 2022 – but Indonesia’s timber market was less turbulent. In 2022, local timber and plywood prices did increase due to higher logistics costs and strong housing demand, roughly on the order of 5–10%. By mid-2023, as global wood supply chains normalized, Indonesian lumber prices stabilized. Ample domestic wood supply and government export restrictions on certain logs helped prevent runaway prices. Overall, from Aug 2022 to present, timber prices in Indonesia are up only mildly (single-digit percent) and in some cases have even eased slightly with improved supply. This relative stability in lumber costs helped limit construction cost inflation for wood-intensive projects.
• Glass: Flat glass and window glass prices have seen gradual increases in line with energy costs. Glass production is energy-intensive (furnaces for float glass), so high fuel prices in 2022 put upward pressure on glass. Domestic flat glass prices rose in 2022 (estimates of around 5–8%) as natural gas and electricity tariffs for industry climbed. By 2023, as energy prices moderated, glass prices leveled off. There were no major supply disruptions since Indonesia produces glass locally. For example, the wholesale price index for sheet glass was about 101.4 (2018=100) in early 2020 and likely climbed into the 105–110 range by 2023 (a few percentage points each year). From August 2022 to today, glass costs are up modestly (~5% total). Builders have reported stable glass quotes in 2023, indicating that after the initial energy-driven bump, pricing for glass and glazing materials has steadied.
• Paints and Coatings: Paint and coating prices crept upward mainly due to raw material inflation. Paint manufacturers faced surging costs for resins, solvents, and pigments in 2021–2022 (many are petroleum derivatives or imported chemicals). By mid-2022, paint raw material costs had spiked about 20% year-to-date . To compensate, producers like PT Avia Avian (Indonesia’s largest paint company) raised selling prices 6–12% in the first half of 2022 . These adjustments in 2022 kept paint supplies profitable but did make building finishes more expensive for consumers. In 2023, with chemical prices stabilizing and the rupiah relatively stable, paint prices saw only mild inflation (low single-digit percent). Avia Avian’s financials reflect this: they managed to increase gross profit ~2.9% in H1 2023, suggesting stable margins after the earlier price hikes. In summary, from Aug 2022 to present, paint and coating prices rose roughly 10–15% in total, mostly during 2022’s raw material crunch, and then remained fairly steady through 2023–2024.
• Other Materials (Sand, Aggregates, Asphalt, etc.): Several other construction inputs experienced significant price movements:
• Sand and Aggregates: Basic materials like sand, crushed stone, and gravel saw steady price increases through 2022–2023. Demand for sand/aggregate surged with the resumption of infrastructure projects, while fuel costs made mining and transport pricier. BPS noted sand prices climbed about 4.2% YoY in 2022 and continued to rise into 2023. By Aug 2023, sand and stone were among the top contributors to construction inflation. Even in late 2023, sand was up 0.27% month-on-month in September. Overall, from late 2022 to present, good-quality sand and aggregate prices have increased on the order of 5–10%.
• Asphalt: Petroleum-based materials like bitumen/asphalt also jumped in price. In 2022, asphalt costs rose in tandem with global oil (Brent crude hit ~$120/barrel in mid-2022). The wholesale index for asphalt and related materials was up sharply – BPS reported aspal (asphalt) as a major driver of 2022 construction inflation. By mid-2023, asphalt prices eased somewhat as oil prices came down; however, they remained higher than pre-2022 levels. We estimate asphalt binder prices rose 15–20% in 2022, then leveled off, leaving them about 20% above August 2022 prices today. This has kept road construction costs elevated.
• Metals and Fittings: Other metal-based inputs (e.g. roofing sheets, wires, nails) mirrored the steel trend. They climbed in 2022 and then stabilized or dipped. For instance, light-gauge steel roof frames became ~10% costlier in 2022, but later saw slight deflation (-0.78% in Sept 2023) as steel prices fell. Copper wiring and plumbing materials were influenced by global copper prices, which were high in 2022 then moderated in 2023, yielding a net small increase (~5%) over the period.
• Cement Products: Downstream products like ready-mix concrete, concrete blocks, and tiles reflected the cement and aggregate hikes. Ready-mix concrete prices rose roughly 10–15% in late 2022 (higher cement + fuel for mixers), and have since remained steady. Ceramic tile prices also went up in 2022 (natural gas for kilns became expensive), by some reports around 8–10%, and then stabilized in 2023.
In summary, August 2022 marked a high-cost period – many building materials were on an upswing due to inflationary pressures. Through 2023 these increases attenuated, with some materials even seeing minor price declines month-to-month. As of early 2025, Indonesia’s construction material costs are generally higher than they were in mid-2022(especially cement, still ~30%+ higher, and certain finishes), but the rate of increase has slowed dramatically. Cement and steel, in particular, went from double-digit inflation in 2022 to nearly flat prices in 2023.
Factors Driving Price Changes
Several primary factors drove these price trends:
• High Inflation and Energy Costs: Indonesia, like many countries, saw a surge in inflation in 2022. Consumer inflation hit ~5–6%, and producer prices for fuel and commodities spiked even more. The jump in fuel prices was critical – in September 2022 the government raised subsidized fuel (diesel and gasoline) prices by ~30%, which immediately raised transportation and operating costs for construction projects. Diesel fuel (Solar) in the wholesale index leapt 8.8% in just one month (Sept 2023), illustrating how fuel volatility impacts material delivery costs. High global coal prices likewise fed through to cement and brick costs (as coal is used for kiln fuel). In short, general inflation and expensive energy in 2022 dramatically increased production and logistics costs, pushing up prices of nearly all building materials.
• Supply Chain Disruptions: Pandemic-era supply chain snarls and the Russia-Ukraine conflict disrupted global flows of key construction inputs. In 2021–2022, international shipping costs were very high and certain materials faced shortages. For example, imported iron and steel inputs were delayed and pricey, contributing to local steel bar inflation . Global shortages of shipping containers and port congestion also raised the cost of imported materials like ceramic tiles, fixtures, and specialty glass. Domestically, some materials faced distribution hiccups – e.g. floods or heavy rains occasionally disrupted sand mining and timber logging, tightening local supply. These supply chain issues in 2022 meant demand often exceeded available supply for various materials, allowing prices to climb. By 2023, supply chain conditions improved (freight costs normalized, global production ramped up), which relieved upward price pressure on items like steel and lumber.
• Global Commodity Fluctuations: Global commodity markets heavily influenced Indonesian material costs. The war in Ukraine drove up international steel, aluminum, and copper prices in early 2022. Construction steel on global exchanges was up ~30–50% at its peak, which translated to higher domestic prices until global markets cooled. Likewise, crude oil’s surge in 2022 made petroleum-based products (asphalt, plastics, paint chemicals) more expensive worldwide. Conversely, by mid-2023 many commodity prices had come down – global steel and copper softened, and coal and oil retreated from 2022 highs. This global downturn helped Indonesia see wholesale price deflation for construction metals in late 2023. In essence, Indonesia’s building material costs tracked the boom-and-bust cycle of global commodities: boom in 2022, correction in 2023. Materials with strong export linkages (steel, aluminum, timber) saw the most direct effects of world price swings.
• Government Policies and Regulations: Policy measures played a role in both exacerbating and mitigating price changes. On one hand, the government’s September 2022 fuel subsidy cut (to reallocate budget) instantly raised costs for all construction activities. This policy move fueled a broad inflationary push in late 2022. On the other hand, authorities took steps to cushion producers: for example, the Energy Ministry fixed coal prices at $90/ton for cement and fertilizer industries (DMO policy), shielding cement producers from paying double that on the open market. This likely prevented even steeper cement price hikes. The government also banned exports of certain raw materials (like scrap metal and some grades of timber) to secure domestic supply, which helped stabilize local prices. Additionally, Bank Indonesia’s interest rate hikes in 2022–2023 (to tame inflation) cooled the property market somewhat, dampening demand growth for materials. In sum, regulatory actions helped moderate extreme price swings – price caps on inputs and stable utility tariffs kept a lid on some costs, even as other policy choices (fuel price hikes, tax changes) added upward pressure.
• Domestic Demand & Supply Dynamics: Local demand and supply conditions strongly influenced material costs. Indonesia’s construction sector rebounded in 2022–2023, with renewed activity in housing, commercial projects, and big infrastructure works (including the new capital city, Nusantara). This demand spike put pressure on supplies of materials. For instance, as projects restarted, builders rushed to buy cement, bricks, and steel, tightening the market. In early 2022 many suppliers faced low inventories (after pandemic production cuts), so pent-up demand outpaced supply, driving prices up. By late 2022 and 2023, supply caught up – cement plants ramped up output (the industry actually has overcapacity nationally), and steel mills increased utilization. The result was a better balance in 2023, with fewer shortages. In fact, some sectors faced oversupply: the cement industry, for example, has excess capacity, which limited how far prices could rise despite higher costs. Similarly, importers stepped in to supply materials like steel and ceramics when local production was insufficient, easing scarcity. Thus, domestic supply responses in 2023 (along with some softening of construction demand growth) helped cool off prices. Regional disparities exist – areas with massive project demand (e.g. Kalimantan for the new capital) saw more upward price pressure than regions with less construction, but overall the national supply-demand dynamic improved after the initial post-COVID surge.
Comparison with Other ASEAN Countries
Indonesia’s building material inflation trend in 2022–2023 was broadly similar to that in neighboring ASEAN countries, though magnitudes varied. Malaysia saw steep increases in early 2022: steel bar prices jumped ~30% (from RM2,680/MT to RM3,500 by April 2022). By year-end 2022, Malaysia’s unit price index for steel was up a modest 1.8% YoY, while cement was up 8.4% YoY – indicating that like Indonesia, Malaysia had a big mid-year spike that partially retreated by year-end. In 2023, Malaysian construction material costs continued to stabilize (e.g. cement up only ~2.8% YoY in Dec 2023). Vietnam experienced even sharper swings for some materials; reports noted construction material prices in Vietnam climbed as much as 36% in 2023–2024 for certain inputs , partly due to surging steel demand from both construction and manufacturing. Other ASEAN markets such as the Philippines and Thailand also grappled with high construction inflation in 2022 (double-digit increases in steel and cement prices) before seeing relief in 2023 as global prices fell. In general, the region felt the impact of global commodity shocks in 2022 – cement, steel, and fuel prices rose across Southeast Asia – and then benefited from improved supply and lower input costs in 2023. Indonesia’s trend falls in line with this regional pattern: a rapid run-up in construction costs in 2022, followed by a plateau or slight correction in 2023 as inflation cooled. The government interventions (such as Indonesia’s coal price cap and fuel subsidies, or Malaysia’s steel price monitoring) have been critical across ASEAN in softening the blow of global price volatility on local construction costs.
Sources:
• BPS – Statistics Indonesia wholesale price index reports
• Antara News, “BPS notes deflation in construction WPI September 2023” – commodity price changes
• TradingView/Kontan analysis of cement industry (SMGR, INTP)
• PT Avia Avian (paint) price adjustment reports
• Kontan & Spindo industry news on steel price hikes
• NAHB and global sources on material cost trends
• Bernama/BusinessToday (Malaysia) construction material index reports
• ASEAN Briefing on regional construction material outlook .
