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International Construction market survey 2018

Tuesday, 15 May 2018




For the first time in over a decade, the future is looking very bright for global construction markets with synchronised activity upswing in Australia, the USA, Europe, Japan and China, according to Turner & Townsend’s International Construction Market Survey 2018.


The survey shows that of the 46 global markets examined, 21 expect to warm up, 23 are set for stability, and only two are likely to cool. Sydney and Melbourne are considered hot, Brisbane is lukewarm and Perth is cold. Global construction costs are expected to rise by 4.3% in 2018, following a 4.1% rise in 2017.

New York repeated its ranking taking the number one spot for the most expensive place to undertake construction activities. San Francisco, Hong Kong, Zurich and London subsequently followed. Sydney was again positioned at number 9, with Melbourne ranked at 19, Brisbane placed at 21 and Perth at 23.


Sydney construction costs are expected to increase by 4% in 2018, Melbourne will also rise by 4 per cent, Perth is expected to increase by 1.5 per cent and Brisbane by 3 per cent. Global construction costs are set to rise 4.3 per cent in 2018, following a 4.1 per cent increase in 2017.


The International Construction Market Survey 2018 analyses input costs, such as labour and materials, and charts the average construction cost per square metre for residential, commercial, industrial, retail, hotels, hospitals, schools, car parks and airports (buildings only).


Gary Emmett, Economist for Turner & Townsend comments: “This is the strongest construction year that we have witnessed since the Global Financial Crisis (GFC), which is boosting optimism. The GFC cast a black cloud over the industry for many years, however that has now lifted. Since the GFC, growth amongst the major advanced economies averaged half the pace of the previous ten years.



“Synchronised global growth looks set to increase the construction industry activity, driven by Australia, the USA, Europe, Japan and China. The Middle East and UK are notable exceptions to experiencing an upswing. This year looks positive for employment, business profits, investment and construction.”


He added, “Federal and state governments in Australia are planning to invest over $50 billon in significant infrastructure projects over the next decade, including Western Sydney Airport. Major road and rail projects are ramping up, boosting the local economies and demand for trade skills. Tunneling is a focus. Sydney Metro Rail is delivering 15 kilometres of tunnels, and Westconnex, a mostly underground 33 kilometre roadway, is underway., Melbourne is starting the West Gate Tunnel project and Monash freeway upgrade, while Queensland is delivering Cross River Rail.”


Australia’s economy in 2018 looks positive, with forecast growth close to three per cent. Sydney and Melbourne are witnessing strong growth in financial services, and real estate, with 17 per cent jobs growth during the year. Unemployment has fallen to 5.4 per cent.


In 2017 short-term visitor arrivals surged to nine million, boosting tourism and higher education industries. Meanwhile, there are proposals for new mining projects in Western Australia, Queensland and South Australia, as minerals prices recover. The renewable energy sector is also buoyant.


Over the past three years (2015 – 2017) there has been a massive upswing in residential apartment construction on Australia’s East Coast, which is now coming to an end in all regions. This period has seen construction costs increase above general inflation in most regions. Construction costs on average are up six per cent over three years, whereas price inflation has grown only five per cent during this period.


Sydney residential construction spend is up by 47 per cent since the 2016 international report. Over the same period construction costs are showing an average 11 per cent increase, while non-residential construction (hotels, offices and retail) activity was up by 11 per cent.


The Melbourne residential construction market grew by 17 per cent during the same period, showing an average cost increase of four per cent, while non-residential market activity rose by 17 per cent.


Brisbane’s residential construction market increased by 12 per cent, showing an average cost upswing of nine per cent. Non-residential market activity also grew by 12 per cent.


Perth’s residential construction market fell by 31 per cent. Construction costs were also down by two per cent and non-residential construction activity fell by eight per cent.


Mr Emmett added, “Construction in Australia is entering another growth phase, which is set to continue until the end of this decade led by road and rail projects, commercial, health, retail, defence and hotel sectors. Costs are likely to increase as competition for construction labour heats up.”


 “On the global front, several European economies are rapidly expanding including Spain, France, and Italy which has not been witnessed during this decade. The EU economy grew by 2.6 per cent at the end of 2017 and continues to strengthen,” Mr Emmett continued.


“In the USA, a massive infrastructure plan is taking shape which includes extensions to federal grants, incentives and permitting simplification to encourage local programs. The country also witnessed GDP escalate at an annualised 3.2 per cent in the last quarter of 2017 and is expected to continue throughout 2018.”


“In China, the One Belt, One Road project along the Old Silk Road will invest billions in technology including fibre optic cable to create a major transport route linking the country,” he concluded.

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