More countries are expected to increase development over the next 12 months than in any year since the financial crisis, while costs will remain relatively stable, according to global consultants Turner and Townsend.
However, the firm’s 2013 international construction cost survey predicted that costs would rise steadily in emerging economies, such as China and Malaysia; and in ‘hotspots’ including Brazil and Qatar which will shortly host major international sporting events.
“Asia, parts of Europe, the Middle East and the US are all warming up,” the firm said in its report. “Investment in housing and infrastructure is building momentum for stagnant economies and projects which had been on hold since the financial crisis began. These are now going out for tender.”
“The start of global recovery is a great time to build. First-mover advantages include stabilised construction costs, reduced schedule risk and the delivery of projects as demand is increasing. In many regions tender prices are becoming more competitive and there are plenty of firms keen to bid. Of course, some developers will prefer to watch and wait before making their move,” the report said.
However, the report noted that industrial development was slowing in some countries, including India and China. It also warned that world events could “erode market confidence overnight” in the “first fragile stages” of the global economic recovery, and that there was “likely to be headwinds still to come”.
The report considered the construction prospects in 23 international markets, which for the first time included Brazil, Poland and Uganda.
According to Turner and Townsend’s analysis, 13 of those countries were likely to see more construction projects start in 2014 than in the previous year – the first time since 2008 that the majority of the countries it studied were projected to increase development over the next year.
Those countries expected to increase development included the UK, Brazil, Russia and Qatar; while China, India, South Africa and South Korea were expected to develop less in 2014 than in 2013. Among the reasons the report gave for these trends were slowing industrial development in China, and a reduction in public and private projects in India.
Global infrastructure expert Graham Robinson of Pinsent Masons, the law firm behind Out-Law.com, said that many of Turner and Townsend’s predictions aligned with industry thinking. However, he noted the absence of the ‘MINT’ countries from the analysis. Mexico, Indonesia, Nigeria and Turkey are “projected to be high growth construction markets”, he said.
“China and India will perform well in the longer-term although China’s growth will slow, and slow more after 2020, as urbanisation slows,” he said. “India is suffering problems currently, but the 2014 elections should see a turning point as India has begun to open its borders to foreign investment.”
“The longer-term prospects for Brazil are not as promising, as deeper reforms are needed to the Brazilian economy. Russia is expected to perform well, although reforms are essential to power the Russian economy forward,” he said.
The Turner and Townsend report also considered which countries would be most affected by construction cost inflation over the next year. It said that tender prices in South Africa were expected to rise by 9% over 2014, with increases of more than 10% being driven by large annual trade wage increases, increased demand for local materials and higher imported material costs. Similarly high increases were forecast for Brazil and India, with a 7% increase in costs predicted; and in Hong Kong, with a 6% increase predicted