Johannesburg has been ranked fourth among the top five global cities where construction costs will increase over the next year, with the cost of construction set to rise about 7.5% over 2017/18, against a global average of 3.5%, professional services company Turner & Townsend’s ‘International Construction Market Survey’ revealed on Thursday.
“In the lukewarm Johannesburg construction market, there is still relatively high inflation [of around 6%], which leads to pressure to increase trade wages and higher material costs and plant equipment. The weaker rand adds to import costs, which pushed up the cost of construction by 5.3% in 2016,” the report pointed out.
It stated that building costs in the city could average at $848.3/m2.
Markets are considered warmer as competition decreases and prices begin to rise. Hot and overheating markets have a higher number of projects and, consequently, there is less competition for tenders, which tends to drive up tender prices.
“The construction sector has yet to recover to pre-2010 levels. Contractors continue to experience pressures on margins and a lack of liquidity. The office and industrial sectors are oversupplied and this casts doubt on the prospects for a pick-up in growth in these sectors this year,” the report stated.
“Economic growth continues to be negatively impacted by political uncertainty, weak global demand and the downgrade to sub-investment grade. The gradual improvement in the world economy and a projected recovery in commodity prices may support the economy in the year ahead,” the report read.
New York, San Francisco, Zurich, Hong Kong and London are the most expensive places to build, with half of the world’s construction markets suffering from skills shortages.
New York has overtaken Zurich as the most expensive city in which to build, with an average cost of $3 807/m2.
Fifty-eight per cent of cities assessed by the study were identified as warm, hot or overheating.
The number of cities considered to be hot in 2017 has almost doubled since last year and includes New York, Dublin, London, San Francisco, Tokyo, Amsterdam and Dar es Salaam. Seattle and Bogota are identified by Turner & Townsend to be overheating markets with costs in these cities expected to rise by 5% and 4.4% respectively.
