The Burrow
Dec 12, 2023
As many countries worldwide deal with supply-chain issues due to the COVID-19 pandemic, costs for materials and labour have gone up, and there have been big delays in completing many projects. This has seen major challenges for construction companies and suppliers intending to build projects.
So, as experts in home and contents insurance and understanding how increasing material costs can impact your insurance, we wanted to compare the cost differences for building materials around the world, based on data from construction tenders.
We have calculated the change in cost from January 2020 to August 2023, measuring a variety of metrics such as building costs and market activity.
Here is what we discovered.
A tender is effectively an invitation to bid for contract, or supply goods or services and often refers to the cost of labour and building materials to construct a building. It’s like getting a quote from a tradesperson to complete a job, but more involved and detailed due to the scale of the project.
Construction companies and material suppliers are typically invited by project managers to submit a tender to complete a project, and if it is approved, more detailed prices and contractual agreements can be formalised to begin the next phase of the process.
Prague saw the largest increase in building prices between 2020 and August 2023 at 49.3%.
Looking at the results year on year, there was a particularly high increase across 2022 where costs jumped almost 21%. It’s a stark difference from the increases seen in 2020 – which was much lower at 2.3%.
The rapidly rising construction costs might relate to issues with shortages of labour. According to Reuters, who spoke with 14 company executives, recruiters, industry bodies, and economists in Poland and the Czech Republic last year, shortages of labour from Ukraine had caused rising costs and delays in manufacturing orders and construction work.1
Before the Russian invasion of Ukraine, Ukrainians were the largest group of foreign workers in central Europe. The Czech Republic and other European countries such as Poland hosted 600,000 workers from the country before the war. However, the rise in prices may also be due to the effects of the COVID-19 pandemic.
Additionally, as noted in a report by Acardis, the war in Ukraine had a huge disruption on supply chains for materials and energy for creating building materials, leading to a five to six per cent increase in inflation across European markets.2
Toronto has seen the second highest construction price increase since 2020 at 40.5%.
When we extended the scope of our research to include the last five years of activity, we could see that prices in the city have been steadily increasing since 2018, too. Toronto saw the highest increases of any country in our index across both 2018 and 2019.
The climbing prices could be due to higher borrowing costs and labour shortages. According to the Canada Mortgage and Housing Corporation, 262,000 homes were built in 2022, but this is anticipated to drop to 212,000 in 2023.3 Construction issues in Toronto from 2020 to 2023 may also relate to how bidding works for construction projects. Toronto doesn’t allow open bidding to all constructors and only to a select few, meaning construction prices remain high.4
Singapore ranked third on our list for having some of the highest increases in building price changes across the past few years. The Southeast Asian country saw price growth of 32.8% from early 2020 to August 2023.
In the year 2020 alone, Singapore had the second-highest increase of 6.4%, which was just behind Auckland’s 6.9%. The worst periods for the city were 2021 (9.1% increase) and 2022 (10.1% increase), however in each of these years, other cities still saw higher price hikes than Singapore.
According to Yahoo! Finance, Singapore’s construction costs average US$3,307 per sqm, ranking it as the fourth-most expensive city in Asia and 31st globally.5
While the Singaporean construction Industry has struggled to meet construction demands, there is some hope for Singaporean residents as market conditions are projected to improve this year, thanks to the price of materials such as metal being predicted to drop.6
Amsterdam showed the smallest increase in construction costs across the period studied at 0.6%.
The city was one of very few that saw occasional decreases year-on-year in construction prices, specifically in 2021, recording a change of -3.2%. In the year following, prices jumped once more to record a 4.1% increase.
According to the Dutch bank ING, the construction market is likely to experience a slight growth of 0.5% in 2023. This is better than the overall Dutch economy, which contracted by 0.3% in the first quarter of this year.7 Meanwhile, roughly 30% of existing homes are selling for more than their asking price, compared to 80 percent a year ago in The Netherlands.8
The Danish city of Copenhagen also saw limited construction price growth across the past couple of years, at 13.3%.
The construction market is expected to grow by 5% to €19,595 million this year.9 According to the German ifo Institute, fewer homes will be constructed in Europe in the future. Denmark is one country expecting to see a significant drop in completed homes – a decline as sharp as -33%.10
The English city saw the third smallest increase in construction prices from January 2020 to August 2023, with the average sitting at 13.5%.
The English city has consistently seen price growth over the past five years, with 2020 being the exception, where no change in prices was recorded.
A review which was done by economics consultant Mitchell McDermott showed that construction costs in Birmingham are from 21% to 29% lower than a similar type of house built in Dublin.11 The analysis of the cost modelling found the differing prices between Dublin and Birmingham are due to a combination of differences in local market conditions and labour costs in the UK.
Cities | Construction Cost Indicator Index 2020 – 2023 |
Prague, Czechia | 49.3% |
Toronto, Canada | 40.5% |
Singapore, Singapore | 32.8% |
Auckland, New Zealand | 30.2% |
Calgary, Canada | 28.5% |
New York, USA | 26.0% |
Washington DC, USA | 24.6% |
Phoenix, USA | 23.8% |
Los Angeles, USA | 23.1% |
Wellington, New Zealand | 22.6% |
Kuala Lumpur, Malaysia | 22.0% |
Melbourne, Australia | 22.0% |
Ho Chi Minh City, Vietnam | 20.9% |
Las Vegas, USA | 20.9% |
Brisbane, Australia | 20.7% |
Jakarta, Indonesia | 19.1% |
Yorkshire & The Humber, UK | 17.9% |
Sydney, Australia | 15.7% |
Bristol, UK | 15.3% |
Canberra, Australia | 15.3% |
London, UK | 14.5% |
Oslo, Norway | 14.1% |
Birmingham, UK | 13.5% |
Copenhagen, Denmark | 13.3% |
Amsterdam, Netherlands | 0.6% |
The Victorian capital had the 11th highest price increases overall, at 22% – tying with Kuala Lumpur across the period included in the research.
According to professional services firm KPMG, a near-record 10,388 houses, townhouses, and apartment units were approved for construction in March of 2023, but many hadn’t commenced construction.12 Property developers have been shelving projects because of soaring costs and lacklustre property prices.
The Queensland capital came 13th at 20.7% from January 2020 to August 2023.
Despite growth over time, the city saw a decline in prices across 2020 of 4.1%. The largest periods of growth for Brisbane were in 2021 (8.8%) and 2022 (9.6%).
According to data collected by Core Logic, Queensland was considered the most expensive place in the country to build a house in 2022.13 Issues relating to a lack of raw materials, and labour had created pressure on residential homes which had been built.
According to PropTrack’s Property Market Outlook August 2023 Report, national property prices are expected to increase between two and five percent by the end of 2023. Cities such as Brisbane and Adelaide were forecasted to see property prices increase between one and three percent in 2024.14
Despite the common belief that Sydney has some of the most expensive house prices in the country, the New South Wales capital came 16th with an average construction price rise of 15.7% from January 2020 to August 2023.
Like Brisbane, Sydney had low growth in 2020 – in fact, the city saw no change in prices across the calendar year. The highest period of growth for Sydney was in 2022 when it reached 6%.
According to the Australian Bureau of Statistics for the first three months of 2023, there had been a decline in the housing market across the country.15 Approvals for construction projects such as townhouses, units, and high-rises dropped significantly by 50%. In fact, the first quarter of 2023 saw the lowest level of building approvals since 2012 in NSW and nationally.
Compare the Market’s General Manager of General Insurance, Adrian Taylor, explained how rising construction costs can have a material impact on the level of insurance cover people have on their homes.
“With costs consistently rising, more and more homeowners are at risk of underinsurance,” Mr Taylor explained.
Mr Taylor said an example of underinsurance could be a homeowner who had bought a house for $500,000 and subsequently renovated and added $100,000 worth of value to the property, without increasing the sum insured on their home and contents insurance policy.
He said if the home was to perish or be significantly damaged due to an insured event, the homeowner may only be entitled to the level of insurance on their policy at the time of the loss.
“Whether you’re renovating to add value to your home, or simply revisiting your existing home and contents insurance policy, it’s important to consider how the price of construction has increased so that you can set an adequate value for rebuilding your home if the worst were to occur.”
He also explained how homeowners should not wait for impeding natural disasters to consider updating their policy in fear of anticipated damage.
“In countries such as Australia, certain times of the year are well known for natural disasters,” Mr Taylor said.
“During such events, insurers have embargoes in place which prevent people from taking out a new policy. So, an individual needs to have coverage well before a natural disaster takes place or is even announced.
“As always, it is important to check your Product Disclosure Statement (PDS) to see if there are any limits, exclusions, or restrictions, before purchasing any given policy.”
To determine construction price changes, Rider, Levett & Bucknall’s Tender Price Index was used. Data was collected annually from January 2018 to August 2023. All data is correct as of 22/08/23.