A solid backlog of infrastructure and commercial construction projects will help protect Australia against a global slowdown, according to management and consulting firm Turner & Townsend’s latest International Construction Market Survey.
Each year the International Construction Market Survey aims to provide an in-depth analysis of constructions costs – and what is driving them – across the globe.
It measures costs for materials and labour to calculate the average cost per square metre across 27 construction types including high-rise apartments, city centre offices, hospitals, schools, warehouses and shopping malls.
This year was reportedly the largest and most comprehensive survey to date, examining a total of 64 global markets.
This year San Francisco was identified as the most expensive place to undertake construction activities, followed by New York, London, Zurich and Hong Kong.
Bangalore was revealed to be the least expensive place to undertake construction, followed by Istanbul, Guangzhou, Nairobi and Beijing.
In terms of Australia, Sydney fell four places and is now positioned at 13, Melbourne was ranked at 31 and fell from 19, Brisbane was placed at 34 falling from 21 and Perth came in at number 38, dramatically dropping from 23 in last year’s survey.
Sydney construction costs grew by 3.5 per cent in 2018, which is expected to be repeated in 2019.
Melbourne construction costs grew by 4 per cent with an increase of 5 per cent expected in 2019.
Perth construction costs rose by 1 per cent and are expected to increase by 1.5 per cent in 2019.
Brisbane construction costs increased by 2 per cent over the period, with expectations it will rise by 2.5 per cent in 2019.
Furthermore, the firm forecasts global construction costs will increase by 4.1 per cent in 2019, following a 4.2 per cent increase in 2018 and 4.9 per cent in 2017.
Gary Emmett, Economist for Turner & Townsend said despite weakening housing markets in Australia, global trade barriers and tightening financial conditions both locally and globally creating headwinds, the local construction sector remains strong.
“As the nation approaches a Federal election and possible change of government, the strength in the construction sector is expected to continue and will help prevent a slowdown.”
Mr Emmett said the Federal Government’s $100 billion investment in infrastructure over the next decade, in addition to the state government investments, will help cushion the economy and keep jobs growth strong.
Turner & Townsend also noted that public sector investment in road and rail is especially buoyant and is also helping to offset the weakening housing sector.
“Sydney Metro, Melbourne Metro, Cross River Rail in Brisbane and Perth’s METRONET will help counterbalance downturns elsewhere. The announcement of the Inland Rail project for freight adds to the high levels of infrastructure investment,” Mr Emmett commented.
Strong mining and energy exports have also helped bolster the Australian economy. According to Australian Treasury’s figures, annual GDP growth reached 2.3 per cent in the 2017/2018 financial year, this was comfortably above most advanced nations.
Mr Emmett said an already busy construction sector in Sydney and Melbourne in 2018 was boosted by a pledge of around $50.4 billion of public funding for road and rail projects in these states alone.
“Work on Western Sydney Airport has already started with $5.4 billion given by the government-owned Western Sydney Airport Corporation to deliver the project through to completion.”
“Activity in Sydney and Melbourne has increased costs and led to skills shortages and supply-chain bottlenecks, putting stress on schedules.”
“In Brisbane, the $4.3 billion Queen’s Wharf project will dominate construction as well as the $5.4 billion Cross River Rail underground project which is underway in the city. Construction in Perth is picking up with a new Ritz Carlton, Chevron HQ tower and METRONET,” Mr Emmett detailed.
“The prospects in 2019 are looking promising with commercial, health, defence, retail, hotel and natural resources construction rising in parallel with massive infrastructure projects. However, sliding house prices in Sydney and Melbourne could curb discretionary spending, raising downside risks later in 2019,” he concluded.
More information on the International Construction Market Survey 2019 can be found here.