International construction market survey 2016

Comparing
construction costs
It is important to compare construction costs between
countries to inform expansion decisions. It can also enable
productivity comparisons, highlighting how different
practices and tools such as BIM can improve design and
delivery. Opportunities to improve the efficiency of the
construction sector and reduce costs are also opportunities
to grow the global economy faster.
Here we look at the advantages and disadvantages of
three methods of comparing construction costs using
an example building type: Central Business District
(CBD) offices – high-rise prestige.
Method one: convert to a single currency such as
USD or euros
This is the most common means of comparison,
useful for a multinational organisation paying for
projects in its home currency.
Advantages
▪▪
Easy to understand and visualise.
Gives the cost of typical building in each country.
▪▪
Disadvantages
▪▪
A change in the exchange rate makes a huge
difference: if a particular currency is strong
compared to the base currency, the cost of
construction looks expensive.
▪▪
Is not a reliable indicator of relative costs and
efficiency of construction between countries.
Figure 10: CBD Offices – high-rise prestige using a single currency (USD) exchange rates
8,000
6,000
4,000
2,000
0
Bangalore
Moscow
Johannesburg
Istanbul
Warsaw
Beijing
Nairobi
Kampala
Kuala Lumpur
São Paulo
Kigali
Muscat
Seoul
UAE
Singapore
Santiago
Toronto
Brisbane
Munich
Melbourne
Amsterdam
Doha
Paris
Northern Ireland
Scotland
Perth
Dublin
UK central
Hong Kong
UK north
UK south
Sydney
Zurich
Houston
London
Seattle
San Francisco
New York City
Method two: Purchasing Power Parity (PPP)
The PPP measure shows costs in relation to cost of
living in the country. It indicates the construction cost
per square metre in the local currency, relative to the
costs of a basket of construction materials and labour.
The PPP cost of a particular building type is calculated
by dividing the cost in m2 in local currency by the PPP
coefficient. A lower PPP cost generally indicates more
efficient construction (see page 82 for more detail).
Advantages
▪▪
Leaves exchange rate out of the equation.
Useful for governments, policy-makers and
researchers to compare costs and efficiency
with other countries.
Disadvantages
▪▪
For a global firm looking to build overseas, it can be
more convenient to look at cost in its home currency.
▪▪
The cost of the basket of goods ignores contractors’
margins, labour productivity and preliminaries.
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Turner & Townsend