The cost of building on prime sites in central London outstrips that of the world’s most expensive nation, according to a new global report
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Consultant Arcadis’ 2014 International Construction Costs Report ranks Switzerland as the world’s costliest country for building, with the UK in eighth place overall.
But its authors said factors including the strength of sterling, comparatively poor productivity levels, and the demand for prime residential development meant central London construction costs now exceeded those in Switzerland.
Arcadis also said legal frameworks and issues caused major delays to UK schemes compared with other countries in the 43-nation ranking.
UK costs in 2014 were also likely to have been exacerbated by widespread brick shortages, which architects said were stretching lead-in times to more than 60 weeks in some cases.
Simon Rawlinson, Arcadis’ head of strategic research, said unique factors were driving the acceleration of building costs in London.
‘The cost of construction in London has been heavily impacted by high specification levels in many of the city’s developments, topped off by the fact that its prime residential property is reaching a capacity ceiling, leading to significant cost inflation over the past year,’ he said.
‘This is bolstered by the UK construction industry being much less productive than its US and European peers and the fluctuation in global currencies, especially the strength of the Sterling relative to the Euro.
‘Given that this is unlikely to cease, the UK is forecast to grow around 3 per cent in 2015.’
Rawlinson said growing economic stability in parts of the Eurozone had led to European nations dominating the top ten for building costs.
Meanwhile many Asian states dropped down the table following currency devaluations, with Macau, Singapore and Japan exiting the top 10.
The cheapest country in which to build remains India.
Arcadis said it expected the prime housing boom in London and other global cities to continue impacting on construction costs, with London potentially seeing price escalation of 5-7 per cent over the coming three years.
It added that commercial projects would be affected but would experience less price inflation due to their ‘more attractive’ risk profile.
The full report can be read here.
2014 costliest countries for building
- Switzerland (2)
- Denmark (3)
- Hong Kong (1)
- Sweden (4)
- Australia (6)
- France (8)
- Austria (11)
- UK (14)
- Belgium (10)
(Figures in brackets are 2013 rankings)
London construction costs most expensive in world