New data reveals that Sydney remains the most expensive capital city for construction in Australia, although it falls far short of being the world's most costly. According to the Arcadis 2024 International Construction Costs Report, that title belongs to London. Interestingly, Sydney has dropped 12 places in comparison to its ranking in 2023.

Furthermore, while construction costs have risen throughout the country, all of Australia's capital cities have experienced a decline in their international rankings.

Sydney has now been ranked 48th in the global construction cost rankings. Brisbane, Melbourne, and Perth have each dropped five places to secure the 51st, 54th, and 62nd positions, respectively.

Interestingly, Adelaide has been identified as the most cost-effective Australian capital city for construction, moving down four places globally to the 67th position.

According to Matthew Mackey, the Executive Director of Cost and Commercial Management at Arcadis, the changes in rankings cannot be attributed to just one or two factors.

“The challenge of rising inflation levels above 5 per cent across Australia’s cities, juxtaposed with a weaker Australian dollar, meant our cities fell in the ICC ranking this year,” Mackey said.

“Rising insolvencies and diminishing capacity has fuelled further construction cost escalation, and while this has not been at the peak of 2022, it has continued to damage and reduce the margins for project viability.

“While the industry grapples with higher construction costs, projects have stalled amid damaging confidence levels.”

But, Mackey said, high construction costs may not persist.

“The strength of longer-term project pipelines suggests these challenges may be short-term,” Mackey said. 

The ICC Index is a comprehensive study that analyses 100 of the largest cities across six continents. It considers various factors, including 20 different building types, construction cost surveys, and market conditions. To conduct the study, a team of global experts from Arcadis contributes their valuable insights and expertise.

The calculations in the ICC Index are based on US dollars and are indexed against the price range for each building type relative to buildings in Arcadis' base location in Amsterdam. This indexing method allows for meaningful comparisons and provides a standardised framework for evaluating construction costs across different cities worldwide.