This City is Now the Most Expensive Place to Build

San Francisco is now the most expensive place in the world to build, usurping New York, while the top five is rounded out by the usual suspects: London, Hong Kong and Zurich.

UK-based consultancy Turner and Townsend has released its annual construction market report, revealing that the global cost of construction is set to rise 4.1 per cent in 2019 after a 4.2 per cent increase in 2018.

The survey, which rates the temperature of 64 global markets on a hot-to-cold scale, describes 18 markets from nine countries as “hot or overheating” and 23 as “warming up”, while just eight markets are described as “cold”.

Perth is one of eight “cold” markets, although the report says it expects a brighter future for the Australian city as Perth experiences the early stages of recovery in its natural resource sector.

The consultancy also cites Perth’s new Ritz Carlton, the Chevron headquarters tower and Metronet as projects boosting the construction industry.

Brisbane moved from lukewarm to warm, buoyed by several infrastructure projects — and the $3.6bn Queen’s Wharf — giving the market a boost.

Sydney and Melbourne retained their “hot” ranking from 2018, with activity in the two cities bumping up costs and leading to skills shortages and supply-chain bottlenecks, the report said.

As for cost of construction, Sydney fell four places to 13, Melbourne fell from 19th to 31, Brisbane fell from 21st place to 34, while Perth experienced a dramatic drop from 23 to 38.

Related: How Does the Housing Downturn Compare to Previous Cycles?

The cost of building in Bangalore is just 13 per cent of San Francisco.
The cost of building in Bangalore is just 13 per cent of San Francisco.Turner & Townsend.

Buoyed by publicly-funded infrastructure projects, Sydney’s construction costs grew by 3.5 per cent in 2018, which is expected to be repeated in 2019.

Melbourne is set to see the largest rises in construction cost inflation, from 2 per cent in 2017 to 5 per cent in 2019.

Investment in road and rail construction along with a buoyant commercial sector are adding to cost increases.

Turner & Townsend economist Gary Emmett said that the local construction sector remained strong despite weakening housing markets.

“The federal government’s $100 billion investment in infrastructure over the next decade, in addition to the state government investment, will help cushion the economy and keep jobs growth strong.”

Meanwhile, the disparity between building in the world’s cheapest and most expensive cities is increasing.

The cost of building in Bangalore is just 13 per cent of San Francisco, and the bottom ten markets have an average construction cost of just 22 per cent of the top ten regions.

“In other words, you could build five similar structures in the bottom ten regions for the same cost as one in the top ten regions,” the report noted.

While Australia’s labour costs are often noted as remarkable, the cost of labour in Australian cities are still cheaper than in Zurich, New York, San Francisco, Seattle, Atlanta and Chicago.

The five least expensive places in the world to build are Bangalore, Istanbul, Guangzhou, Nairobi and Beijing.

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