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Building in Brisbane More Expensive than Melbourne

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Brisbane has leapfrogged Melbourne as Australia’s second most expensive city for construction behind Sydney, a new report has found.

Research released by global design and consultancy firm Arcadis has ranked Sydney as the 34th most expensive city for construction globally, with Brisbane now in second place at 56 while Melbourne has dropped to 61st position.

The research, derived through a comparative cost comparison index for 100 cities, covering 20 building functions, is based on a survey of construction costs, review of market conditions and professional judgement from experts globally.

Construction activity levels fell at their fastest rate in more than six years, driven by an even steeper decline in the residential sector – although this was largely concentrated in Sydney and Melbourne.

Activity levels and new orders continued to decline over April with margin pressures intensifying.

Employment in the sector has also fallen at its fastest pace in years, an ominous result given the construction sector is the third-largest employer in Australia, behind healthcare and retail.

Related: This City is Now the Most Expensive Place to Build


The most expensive cities for construction

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


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 cent per year for the next two years.

Arcadis director Matthew Mackey said despite the downturn the total value of non-residential construction was tipped to increase across 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.”

Despite the drag, Brisbane's market remains buoyed by an extensive infrastructure pipeline and an influx of southerners heading north.

Major projects such as Brisbane Live, Queen’s Wharf and Cross River rail will boost construction activity significantly over the next few years and potentially provide a more distinct recovery in activity ahead for Queensland.

The short-term outlook remains somewhat discouraging with many of these major infrastructure projects not due to commence construction for some time.

Related: Building Construction Shrinking at a ‘Concerning Rate’

RankCity
34Sydney
56Brisbane
61Melbourne
62Perth


Profit margins remain tight

Limited availability of resources, at all levels of the supply chain, has remained a key issue – particularly in Sydney and Melbourne where construction markets are quite heated.

The cycle of infrastructure construction has also continued to fuel price increases whilst also creating a significant demand for tradesmen to meet the current and upcoming workload.

“Cost pressures remain high industry-wide across Australia,” Mackey said.

“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.”

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Article originally posted at: https://www.theurbandeveloper.com/articles/brisbane-overtakes-melbourne-for-construction-costs