Property construction costs are rising worldwide
Arcadis has analysed property sectors in several regions. The list includes 100 cities across EMEA, APAC, the Americas and Europe. The focus of the analysis was on property construction costs. Both the residential and commercial sectors were under consideration.
According to Eric Blockhayes of Arcadis, the supply chain recovered in 2023. However, market demand has declined, and investor attention has shifted to the technology sector.
Analysts have noted an increase in construction costs. This is mainly due to new regulations for the construction of plants. Tighter safety standards have resulted in higher costs for developers. As a result, construction volumes have fallen by around 10%-20% year-on-year. Moreover, the decline has been seen across all market segments. Geopolitical conflicts and natural disasters played an important role in the development of the industry. The Middle East, Europe and Turkey were the first to suffer. As a result, the number of orders for new projects fell in almost all regions.
Overview of property construction costs
Property construction is the most expensive in London. Although inflation in the UK has slowed significantly, project costs are rising. The following factors are influencing pricing:
– increased requirements for property safety;
– efforts to ensure environmental friendliness;
– high client expectations.
In addition to London, the UK’s most expensive cities for construction include Bristol.
Geneva is the second most expensive city in terms of property construction costs, followed by Zurich. Munich, which has seen double-digit price growth over the year, is fourth. Germany has a shortage of manufacturing capacity, and demand for housing is low. At the same time, inflation remains high, increasing costs for developers.
The top 10 most expensive cities also include three American cities:
– New York;
– San Francisco;
– Philadelphia.
Philadelphia’s inflation has reached 5%, higher than most other US locations. This city is in seventh place in the ranking, followed by Copenhagen, Hong Kong, and Macau.
Predictions for 2024
Analysts expect interest rates to fall in Europe, the US, and the UK in 2024. This will be a positive stimulus for the construction sector. However, the IMF notes that the recovery will be weak, especially for residential and commercial property. This trend will continue until 2025.
Furthermore, a slowdown in policy rate hikes could lead to an economic downturn. This applies to the US, parts of Asia and European countries. Analysts also warn of low consumer confidence. This factor has a direct impact on the number of orders and demand.