Arcadis’ latest International Construction Costs Report 2019 reveals that Sydney tops the list of most expensive cities in Australia for construction. Sydney was ranked 34, ahead of Brisbane (56), Melbourne (61) and Perth (62).

The International Construction Costs Report 2019 by Arcadis provides comprehensive information about the relative cost of construction in 100 of the world’s leading cities. While New York was named the world’s most expensive city for construction, followed by San Francisco and Hong Kong, Sydney’s cost of construction was the highest in Australia.

The report attributes the high cost of construction in Australian cities to the state of the economy, which has continued to lose momentum since the latter half of last year, with GDP growth expected to be around 2.6 percent per year for the next two years.

According to Matthew Mackey, national director, cost and commercial management Australia Pacific, Arcadis, construction activity levels in November 2018 fell at their fastest rate in nearly four years – a fall largely driven by an even steeper decline in the residential sector, especially in Sydney and Melbourne.

The slowdown in residential construction notwithstanding, Mackey says the industry is particularly buoyant across the Eastern Seaboard, again confined predominantly to Sydney and Melbourne. However, the total value of non-residential construction is expected to increase in 2019.

“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 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,” added Mackey.

Image: Dealer Solutions