san francisco
San Francisco is the most expensive city in the world for construction labour. Image supplied.
  • The International Construction Market Survey (ICMS) ranks metrics across 88 global cities
  • Australia ranks as the fourth most expensive country for construction labour, after Switzerland, Austria and the United States
  • Perth is the most expensive of the Australian cities

Amid significant labour shortages, supply chain disruption and net zero demands, Australia has ranked fourth in terms of the highest cost of labour across any global region.

The International Construction Market Survey (ICMS) ranks metrics across 88 global cities and has found Australia to be among the most expensive despite having been relatively successful at containing the spread of Covid at the beginning of the pandemic.

It found that Australian construction labour costs an average of USD $75.5 per hour (AUD$109.66). Switzerland (USD$118.10/AUD$171.53) is the most expensive country globally, followed by Austria (USD$77.70/AUD$112.86) and the United States (USD$77.10/AU$111.98).

Most expensive cities in Australia per sqm

In terms of the most expensive cities, however, no Australian city is among the top 25.

Perth is ranked at 36th, with an average cost of USD$2,822 per sqm (AUD$4,098.81), followed by Sydney (42nd) at USD$2,699 per sqm (AUD$3,920.16), Melbourne (44th) at $2,666 per sqm (AUD$3,872.23), Brisbane (46th) at $2,620.7 per sqm (AUD$3,806.44) and Adelaide (50) at $2,454.4 per sqm (AUD$3,564.89).

The report also noted that the average construction cost inflation in Australia is expected to fall from 8% this year to 5.5% next year, which is the lowest forecast rate for any global area.

Most expensive cities globally per sqm

On a global bases, US cities dominate the ranking, with San Francisco the most expensive city in the world, at an average cost of $4,729 per sqm (AUD$6,868.64). Tokyo and Osaka rank second and third respectively.

Market temperatures, which are used to measure pressure on local supply chains based on the volume of demand and tendering conditions also highlight the tough challenges being faced by industry.

38.6% of markets surveyed were classified as ‘hot’ or ‘overheating’, signifying conditions that are at risk of placing a brake on development. This is up from 10% in 2021.

“All markets in Australia are expected to get warmer over the next 12 months,” commented Annoj Oodit, Managing Director ANZ and Asia for Turner & Townsend.

“Brisbane and Perth markets are currently hot, while Sydney, Melbourne and Adelaide are warm. Skills shortages, construction cost inflation and long lead times are some of the biggest challenges facing Australia’s construction market.

“Residential construction is strong across the country, resulting in local supply chain constraints and bottlenecks in most markets. Recent wet weather events in Brisbane and Northern New South Wales have placed additional pressure on labour shortages in these states.”

Annoi Oodit, Turner & Townsend

In terms of Perth, Mr Oodit said the local market is suffering from a skills and migration shortage due to lower skilled labour migration, compounded by the resources sector and government stimulus.

“This is increasing cost, time and quality pressure in the construction market with significant volatility being experienced in civil, concrete and steel prices with cost increases up by 40 percent for specialist trades,” he added.

“A heated local market is exacerbated by strain on tier 1 and tier 2 builders due to COVID-19 and other financial pressures, which has led to less competitive market conditions. Rising material costs are postponing some projects as recent tender returns reflect higher steel and concrete prices, challenging the feasibility of both current and projects at the design stage.”

“Material shortages are also lengthening the anticipated project durations and increasing costs. Delays and allowances for temporary shortages need to be made which is a shift from pre-COVID-19 when just in time delivery to site and procurement models dominated.”

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