Sydney is Australia’s most expensive city for construction: Arcadis report

Sydney topped the rankings for Australia, with Brisbane, Melbourne and Perth all falling middle of the road for the cost of construction, according to a new report. 

The International Construction Costs Report 2019 from Arcadis, the global design and consultancy for natural and built assets, found that New York was the world’s most expensive city, followed by San Francisco and Hong Kong.

Sydney was the most expensive Australian city at 34, followed by: Brisbane (56), Melbourne (61) and Perth (62). The report details the relative cost of construction in 100 of the world’s leading cities. 50 cities were added to this year’s report, including Perth, making it the largest comparison of its kind.

According to the report, the cost of construction in Australian cities was heavily impacted by the economy, which continues to lose momentum since the latter half of last year, with GDP growth expected to be around 2.6% per year for the next two years.

Matthew Mackey, National Director, Cost and Commercial Management Australia Pacific, Arcadis: ‘‘In November 2018 Construction activity levels fell at their fastest rate in nearly four years. This was largely driven by an even steeper decline in the residential sector – although this was largely concentrated in Sydney and Melbourne. However, the total value of non-residential construction is expected to increase in 2019.

“Despite the slowdown in residential construction, the industry is particularly buoyant across the Eastern Seaboard – although this is again confined predominantly to Sydney and Melbourne” said Mackey.

“Cost pressures remain high industry-wide across Australia. This is due to several factors including a robust demand for construction materials, a lack of market competition, skills shortages, increasing energy and labour costs and elevated supplier prices due to strengthening commodity prices. The gap between value and cost continues to reduce and this demonstrates that profit margins will remain tight for both contractors and developers across the construction industry.

‘‘The limited availability of resources, at all levels of the supply chain, has become a major issue – particularly in Sydney and Melbourne where construction markets are quite heated.

‘‘Whilst construction activity in apartments and housing has stalled recently, activity in other sectors such as commercial, transportation and social infrastructure means that this decline is unlikely to be a precursor to an economic downturn.

‘‘The cycle of infrastructure construction is continuing to fuel price increases whilst also creating a significant demand for tradesmen to meet the current and upcoming workload. This demand will continue to put further pressure on both trade pricing and margins. Tender pricing will therefore continue to increase over the short term.”

Top 10 most expensive cities for construction:

1. New York City
2. San Francisco
3. Hong Kong
4. Copenhagen
5. Geneva
6. London
7. Macau
8. Zurich
9. Tokyo
10. Boston