Sydney the ninth most expensive city in the world to build in, Turner & Townsend survey finds

Sydney has become one of the most expensive places in the world to build as the city’s construction boom fuels demand for building materials and tradesmen.

The harbour city, which has been named the ninth most expensive location in the world in which to build, was the only Australian city to rank in the top 10 in Turner & Townsend’s International Construction Market Survey 2017.

Melbourne ranked 20th out of the 43 markets surveyed as part of the global comparison, and Perth and Adelaide followed in the 21st and 22nd spots.

Top of the list were New York, San Francisco and Zurich, and Hong Kong and London rounded out the top five. 

“It’s all a question of supply and demand really,” said Turner & Townsend senior economist Gary Emmett. “Australia is also a wealthy country, we have high wages, which leads to high costs.

“When there’s a lot of work on we get price spikes. Wages seem to pick up due to shortages of tradespeople, materials are in greater demand, and the time it takes to build can be longer … in construction time is money.”

He noted that construction in larger cities such as Sydney often included working in tighter spaces and within fewer hours due to stricter noise restrictions, which also drove up costs.

Figures show that while 1000 standard bricks in Sydney would cost an average of $785, it would cost $520 in Brisbane – a difference of $265.

The price of bricks in Sydney is up 33.1 per cent from $590 in 2015, almost triple the 9.6 per cent increase Melbourne had over the same two-year period as the cost of bricks rose from $520 to $570.

Meanwhile, the cost of structural steel in Sydney has jumped 17.1 per cent over the same period from $2050 to $2400 a square metre, while it has barely changed in other cities.

When it comes to labour costs, Sydney and Melbourne were the most expensive Australian cities in which to hire different tradesmen.

Demand in the two cities placed them among the 16 “warm” markets, while Brisbane was deemed lukewarm and Perth cold. 

“We’ve been through an apartment construction boom on the east coast, it’s running out of steam in Brisbane and Melbourne is showing signs of this, but not Sydney.”

Construction costs in Sydney and Brisbane are estimated to rise 3 per cent in 2017-18, 2 per cent in Melbourne, and to remain flat in Perth.

Among the seven hot markets were London, Amsterdam and San Francisco, while Bogota and Seattle were considered to be overheating.

“The construction market is so cyclical,” Mr Emmett said. “[With an overheating market] it gets to a point where it’s too expensive … and building projects start getting cancelled, which means there’s less pressure on the construction industry.”

The top 10 most expensive markets to build in:

1. New York
2. San Francisco
3. Zurich
4. Hong Kong
5. London 
6. Seattle
7. UK South 
8. Dublin
9. Sydney
10. Houston