Arcadis report finds construction prices held through coronavirus pandemic

Dutch consultant Arcadis has published its annual rankings of the most expensive cities in which to carry out a construction project.

The 2021 International Construction Cost Index (ICC) shows some change in position among the European cities that occupy the first five places, and a fall in costs in American cities, reflecting a fall in the value of the dollar.

However, the most surprising finding is that prices have not fallen in response to the pandemic. The authors comment: "In the past, when demand for construction has fallen, construction prices have fallen sharply. Even after the huge disruption in markets last year, this has not happened."

The report adds that World Bank data shows that global GDP contracted 4% in 2020, but it notes that there is evidence that "construction markets across the globe have remained stable and resilient despite the unprecedented disruption to economic activity … and had played a key role in the short-term economic recovery efforts launched by many governments".

Geneva has become the most expensive city to undertake construction work. London, the previous holder of the dubious honour, has fallen to second place. The top five places have all been filled by European countries, with Copenhagen, Oslo and Zurich taking the next three spots.

New York, which was second in 2020, has fallen to sixth place, above San Francisco, which has declined from sixth to seventh.

Arcadis notes that the addition of Oslo to this year’s ranking affected cities’ positions, however more generally the changes were driven by currency movements rather than relative changes in construction inflation.

In particular, the fall in the value of the dollar after April 2020 following the Federal Reserve’s adoption of ultra-low interest rates affected economies in the Middle East and Singapore (46th), whose currencies are pegged to the dollar. By contrast, the euro has appreciated 10%.

For Asia, the special cases of Hong Kong (eighth) and Macau (10th) headed the list, followed by Tokyo (11th). Last year, Hong Kong was third and Tokyo seventh.  

The most expensive cities in Australasia were Auckland (13th), Christchurch (19th) and Sydney (29th).

Riyadh (40th) was top of the Middle East and North Africa and the Chilean capital of Santiago (59th) topped the league for Latin American. For Africa, Johannesburg (92nd) and Nairobi (93rd) headed the list.  

The rankings highlight the lower costs enjoyed by China, India and southeast Asian cities: dynamic centres such as Bangkok, Hangzhou, Shenzhen, Guangzhou, Kuala Lumpur, Mumbai and Ho Chi Minh City all came in the bottom 15, with costs well under a half of the global average.

A copy of the report can be downloaded here.

Image: Geneva, seen from Mount Salève (© Yann Forget/Wikimedia Commons/CC-BY-SA)

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