Sydney construction costs rank 14 in 2016 survey
Compared to the rest of the world, construction costs within Australia remain pretty stable. However, according to Turner & Townsend’s International Construction Market Survey 2016, further opportunities need to be explored within the supply chain to become more cost effective, whilst improve productivity.
According to the survey, the most expensive place for construction is in Zurich, Switzerland, whilst Sydney comes in at number 14. Other Australian cities were surveyed, with Perth ranking number 18, Melbourne number 20 and Brisbane came in at number 22.
So what does this survey actually look at? The International Construction Market Survey 2016 takes into account input costs including labour and materials whilst works out the average construction cost per sqm for not only residential projects, but also for commercial projects.
Overall, the survey highlights a general slowdown in global construction activity, with only a few locations seeing significant price growth during the year.
This year, the survey has taken data from industry experts in 38 key world markets. There have also been a number of newcomers to this survey including Istanbul, Kigall, Paris, San Francisco and Zurich.
Swiss newcomer Zurich, has typical construction costs reaching USD3,683 per sqm. Global construction costs are expected to rise overall by 2.9 per cent in 2016, with nine markets experiencing an increase in activity levels, 19 markets will stay the same and ten will set to fall.
Over the next 12 months, Sydney, Melbourne and Brisbane are expected to stay the same, whilst Perth is expected to cool down.
Gary Emmett, Senior Economist for Turner & Townsend says, “Since last year’s survey Australia’s construction costs have only increased a few per cent in contrast to other countries where markets are overheated.
“To ensure Australian prices stay at reasonable levels, the construction industry must think differently and look for cost savings within the supply chain where the biggest savings and innovation can be found. These include manufacturing production, design and logistics.”
Mr Emmett also commented, “The industry needs to collaborate with suppliers to look for savings as opposed to traditional adversarial relationships. The use of building information modelling (BIM) will help the industry collaborate to gather data and share plans throughout the lifecycle of an asset to find greater cost saving efficiencies.”
Construction costs in Australia are expected to rise 2.5 per cent on average in 2016 compared to 2.9 per cent globally. This is helped by the high labour costs in all four Australian cities, which are some of the highest in the world after Zurich, New York City, San Francisco and Seattle.
Australia is starting to turn from resources to services industries, but this differs from state to state. Brisbane, Perth and Adelaide are the capital cities most affected by the falling resource investment. However, in spite of this, Sydney and Melbourne are seeing real estate, property services and financial services performing well.
Both Sydney and Melbourne have extensive road and rail infrastructure construction programmes underway. The residential apartment construction market is also being driven by low interest rates and property investors, particularly in Brisbane, Melbourne and Sydney.
During 2015-16, costs increased in Brisbane by 4 per cent and 3.5 per cent in Sydney, whilst Melbourne and Perth both saw 1 per cent cost increases. The apartment boom in both Sydney and Brisbane has contributed to these higher costs, whilst Melbourne is currently undergoing a flat period after its apartment boom in the last few years. Perth sits steady after its mining boom.
As costs get more expensive, property values will ultimately increase. With land becoming more expensive, due to a land shortage, particularly in densely populated inner-city areas like in Sydney which are restricted by the harbour. Prices will go up if there is limited supply and higher demand. It is important to remember that land is increasingly becoming more expensive for developers to purchase due to the imposition of government taxes, whilst labour costs are amongst the highest in the world, so you will tend to find that these higher land costs are passed onto property buyers.
Average cost of six building types – Top 20
2. New York City
4. San Francisco
5. Hong Kong
6. UK south
8. UK north
9. UK central
11. Northern Ireland
Published on 1st of June 2016 by Marty Stanowich