International construction market survey 2016

Terms and references
Building costs per m 2
In this survey, building costs per m 2 , sometimes referred
to as direct costs (as opposed to indirect costs) are for
construction of the building, including preliminaries (or
general conditions) costs and substructure, columns,
upper floors, staircases, roof, external walls, external
doors, internal walls, internal doors, wall finishes, floor
finishes, ceiling finishes, fitments, plumbing, HVAC,
fire protection, electrical and communication systems
and transportation systems.
It is assumed that building costs are based on the typical
building standards and building methods for the region.
Exclusions from building costs per m 2
External works, landscaping, professional fees, demolition,
loose furniture, fittings and equipment, developer’s internal
costs and finance, local authority fees and headworks
charges, land, legal, finance and holding costs, GST or
sales taxes, site investigation and test bores, removal of
significant obstructions in the ground, abnormal footings.
Allowance for underground or onsite car parking is also
excluded from the building cost unless stated otherwise.
Labour costs
Labout costs are the all-inclusive cost to the employer,
which includes the basic hourly wage, allowances, taxes,
annual leave cost, and where paid by the employer,
workers’ compensation and health insurance, pensions
and travel costs and fares. It excludes overheads,
margins and overtime and bonuses.
Composite trade rates
Composite trade rates are the fully installed rates charged
by the subcontractor to cover labour, materials, delivery,
plant, overheads and margins and sales tax.
Construction costs and exchange rates
This survey’s construction cost data comes from
programmes underway at the beginning of 2016,
and excludes applicable taxes. All exchange rates
are from January 2016.
Purchasing Power Parity (PPP)
PPP is a technique that compares construction costs with
the cost of living (purchasing power) in each country.
In short, it’s a better way to compare construction
costs between countries.
The PPP methodology removes the impact of exchange
rates, which are notoriously volatile. Often costs are
converted to USD (or any other currency) in order to
compare costs between countries. Because exchange
rates have fluctuated so much in recent times, this can
give a false impression of how a country’s construction
costs compare with others. A high exchange rate will
make local costs look high against the comparison
country. A low exchange rate will do the opposite.
To gain a better indication of whether a country’s
construction is expensive we use PPP. A standard basket
of goods is priced in each country in the local currency.
This basket includes quantities of labour, plant and materials
common to all forms of construction. Then we compare
the cost of the basket of goods with the cost of construction
in the country to obtain a purchasing power parity cost.
The higher the PPP cost, the higher the cost of construction
in local cost-of-living terms. PPP costs can, therefore,
be used to better compare the relative costs of building
from country to country.
Though such indexes are used in some branches of
economics, it has not often been used to compare
construction costs. We have developed this methodology
with the Centre for Comparative Construction Research
(CCCR) at Bond University, Australia”, using their CitiBloc
method for the calculation of basket item costs.
To compare PPP costs, divide the $/m 2 rate in local currency
by the PPP coefficient for that country.
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Turner & Townsend