Johannesburg Still Among Most Affordable Cities In The World To Develop In.
A pandemic-induced slump is making it difficult for South Africa’s troubled construction industry to bounce back, and soaring prices is making matters worse.
Building in Johannesburg, where a square metre costs about R19,082, is less expensive than building in Cape Town, where a square metre costs about R20,851.
According to a recent research by construction consultant firm Turner & Townsend, despite the fact that South Africa’s construction industry is still working to recover from the pandemic-caused depression, building in Johannesburg is still less expensive than in most other countries.
The Covid-19 pandemic weakened construction activity in South Africa. Building spend in 2021 dropped by 19% compared to 2019, and the number of construction plans approved in 2020 fell by 37%. The sector is only now starting to recover, although at a slow pace, according to Turner & Townsend’s International Construction Market Survey (ICMS) for 2022 published at the end of June.
Higher inflation, coupled with increased electricity and fuel costs, presents more pain for the construction industry.
“The volatile pricing backdrop means the risk for contractors is elevated,” said Stephen McCartney, managing director at Turner & Townsend Africa.
“Construction project schedules regularly increase as a result of material supply shortages. Project teams are having to take measures to surmount supply challenges including early procurement, early payment to contractors, or having contracts in which the client sources and issues material themselves.”
Despite these challenges, building in South Africa is still much cheaper compared to construction costs in other countries.
As part of its ICMS report, Turner & Townsend produced a global ranking of the average cost to build in each market. Rankings are determined according to the average cost of 11 building types in USD per square metre.
Although converting construction costs into a single currency – in this case, the US dollar – is the simplest way of comparing costs across different markets, Turner & Townsend noted that exchange rates “should be considered when drawing comparisons.”
San Francisco, where the average square-metre costs $4,782.50 (around R81,330), is the most expensive city to build in, followed closely by Tokyo and Osaka in Japan. New York City, Geneva, Zurich, Hong Kong, Boston, Los Angeles, and London are also among the world’s top 10 most expensive cities to build in.
In Africa, where Turner & Townsend profiled eight markets, the most expensive city to build in is Lagos, where a square metre costs $2,056.10 (around R34,967). Lagos is followed by Harare, with an average square-metre cost of $1,804.50 (around R30,681). These costs are comparable to those in Dubai and Abu Dhabi, where inflation has been more subdued, and the sector’s post-pandemic recovery has been strong.
Building in Cape Town, where the average square-metre costs $1,226.30 (around R20,851), is more expensive than building in Johannesburg, where the average square-metre costs $1,122.70 (around R19,082). The cost range between building in Cape Town and Johannesburg is comparable to Buenos Aires, Kigali, and Hanoi.
In addition to being cheaper than Cape Town, building in Johannesburg is more affordable than 85% of the cities profiled by Turner & Townsend. Johannesburg isn’t the cheapest African city to build in. That title belongs to Nairobi, where the average square-metre costs just $813.80 (around R13,827).
According to Turner & Townsend’s rankings, construction in Hyderabad, India, costs $646.30 per square metre on average, making it the most affordable city in the world to develop in (around R10,986).