Even as conditions in the Australian construction industry continue to deteriorate, costs continue to rise, making Australia the third costliest location in which to construct buildings and infrastructure throughout the world.
In its 2012 International Construction Costs report, building surveyor firm EC Harris Built Asset Consultancy says Switzerland ranks as the most expensive nation for building and construction, followed by Denmark. Australia came third, up from fifth on the list last year.
While Australia’s move up the ranks is no doubt partially due to large-scale cost blowouts in resource projects, there are indications that in spite of weakening selling conditions, costs continue to rise across the board. Indeed, the most recent Performance of Construction Index report indicates that both wages and input costs have risen every month for at least the past two years even as selling prices have been in decline since October, 2010.
More broadly, the report shows that construction costs throughout the Asia-Pacific region, North America and parts of the Middle East are closing in on prices in Western and Northern Europe.
Indeed, the study, which benchmarks 53 countries across the globe, found that trends in construction costs reflect those in the broader global economy. As the threat of default in countries such as Greece and Portugal impacts prices across the continent, Europe registered just five of the 10 most expensive countries to build, down from eight last year.
Furthermore, even stable European countries were impacted. Despite remaining at the top of the table, Switzerland has seen construction costs fall by 10 per cent over the past year, EC Harris says. Germany, too, has seen costs fall.
Conversely, countries which have been less impacted by global uncertainty, including Canada, Australia and Qatar have moved up the table.
Asia now has four of the 10 most expensive markets. Outside of Australia, which heads the list, Japan, Hong Kong and Singapore occupy the fourth, sixth and seventh spots, respectively.
Mathew Riley, Group Head of Cost and Commercial at EC Harris, says the overall trends in costs are not surprising.
“Those countries that are least constrained by debt problems are continuing to invest in construction activities to help fuel their continued growth,” he says. “In such a scenario the volume of work undertaken is creating an increased demand for both commodities and skills, which is inevitably driving costs upwards. In markets like Qatar and Canada, where capital investment has been focused on long-term infrastructure projects, there will be a sustained pipeline of work which is likely to see construction costs rise even further on both a short and medium term basis.”
Outside of economic factors, EC Harris says another significant issue impacting cost rankings was the need to respond to natural disasters. Costs in Australia, New Zealand and Japan rose by 13 per cent, seven per cent and 20 per cent respectively following the devastation caused by earthquakes, tsunamis and major floods.