Switzerland remains world’s most expensive place to build

According to the report, the price of construction in Switzerland is 71% higher than in the UK where costs are now more than 20% below their peak price in mid-2008.

The annual report, which benchmarks the construction costs in 55 countries across the globe using UK prices as a baseline, found that Europe continues to be the most expensive continent in which to build, providing eight of the top 10 entrants in the final league table.

Overall, the UK is now tied with Bahrain as the 12th most expensive place in the world to build, up four places from 2010 where it finished in 16th place. However, this has been largely due to falling costs in other countries rather than rising prices in the UK where construction costs have continued to drop over the last 12 months, with contractors prepared to work for ever slimmer profit margins to try and secure work in an increasingly competitive arena.

Denmark retained its position as the second most expensive place to build, closely followed by its Scandinavian neighbour Sweden. Australia and Canada were the only non-European markets to make it into the top ten although Bahrain just missed out, finishing in twelfth place overall alongside the UK. India and Sri Lanka were tied as the cheapest countries in which to build with construction costs estimated to be 72% cheaper than the UK baseline.

Japan was excluded due to uncertainty over costs in the post-Fukushima environment and Finland was also excluded from the 2011 survey.

Mathew Riley, head of cost and commercial at EC Harris, said: “It’s no surprise to see that Switzerland and the Scandinavian countries are the most expensive places to build as high labour costs and the need to import materials are all combining to drive prices up. The interesting element is that we’re now starting to see signs that developing nations are closing this gap as they continue to invest in significant new-build programmes to fuel further GDP growth.”

The report also underlines the need for Western economies to start planning ahead now to guarantee access to the raw materials needed for future construction projects. During the economic downturn global supply chains have shifted their focus to meeting the demands of economies such as China and India and are likely to continue to prioritise them over the coming years as they offer the greatest revenue growth opportunities. Without robust levels of risk analysis here, contractors will not be able to guarantee continuity of supply as materials will be less readily available or disproportionately more expensive.

Riley added: “The industry can no longer take supply as a given, it needs to start proactively managing this risk through forward-planning and smart procurement strategies. Certain commodities will only be available in finite volumes so it is imperative that contractors work with the supply chain to get this long-term visibility of what will be required well ahead of schedule. Without this rigorous approach serious cost and time overruns on construction projects will be inevitable, as key materials with be unavailable or only within reach to those who can afford to pay premium prices.”

Construction costs are consistent amongst the largest EU countries with Ireland, Germany, France, Austria, Italy, Belgium and the Netherlands all within a range of 20% of UK costs.  Eastern European prices are generally cheaper, with differences ranging from 30% lower in Poland to 45-50% lower in Bosnia, Macedonia and Bulgaria. Costs are likely to drop further in those countries who received a bailout from the IMF, as a demand for construction services will inevitably fall due to an absence of available capital.

Despite a rise in construction activity during 2010, the outlook for the UK construction sector will be tough over the next couple of years and the fall in construction tender prices, which started in 2008 is expected to continue well into 2012 for most of the country, according to the report.

Following the boom and bust of 2009, the Middle East is continuing to exhibit slow signs of recovery with significant programmes of work planned in many countries for projects covering affordable housing, education, health and transportation. Overall costs are broadly similar to the UK with Bahrain, Qatar, the UAE and Oman all within 10% of the UK baseline. Saudi Arabia emerges as the exception here with costs around 40% cheaper than the UK market.

In Asia Pacific, overall construction prices across the region show huge variations. Whilst Australia is an expensive place to build, cheap labour mean that construction costs across most of the region are substantially lower than the level in the UK. Singapore and Hong Kong are both deemed to be 10% cheaper than the UK although this figure is likely to close over the coming year.

Average construction costs in the US are around 10% lower than in the UK although as the economic recovery progresses these costs are likely to rise. Costs in Canada have dropped since 2010 and are now on a par with the UK.

Ten most expensive countries in Europe to build

 * Finland was excluded from the 2011 survey

Ten most expensive countries in the world to build

 Note – Japan excluded due to uncertainty over costs in the post-Fukushima environment

Got a story? Email news@theconstructionindex.co.uk