Swiss construction costs have soared when viewed on an international basis. Various international construction cost studies have long placed Switzerland at the head of the pack, as illustrated in the EC Harris Article titled “Switzerland tops table as world’s most costly nation for construction”. Only Hong Kong and Denmark are anything like as expensive as Switzerland as shown in the graph below.
Figure 1 – International Construction Cost Report 2014 Arcadis
Switzerland is now the most expensive country in the world for construction according to the 2014 International Construction Costs Report released by Arcadis.
Arcadis is an annual study, which benchmarks building costs in 43 countries across the globe, that found that relative construction costs have been affected by currency fluctuations, commodity prices and increasing demand for development in many recovering economies throughout the year. These changes have seen the cost of building in the UK increase significantly.
In contrast to 2013’s Arcadis index, European countries dominate the top ten. This is due, in part, to the ongoing economic recovery in countries such as Germany and France which is gradually translating into contractors demanding more for their services. Meanwhile, currency devaluation in many emerging markets means that relative costs have dropped considerably in these areas. Costs in countries such as India, Indonesia, Malaysia, Thailand and Vietnam are now substantially lower than costs in the UK.
The swift appreciation of the Swiss Franc on January 15th 2015 by almost 20% against the Euro is large in comparison with most exchange rate movements since the mid 1990’s. Though the Swiss Franc strongly appreciated starting from September 2008 and ending with the introduction of the 1.20 Francs per Euro floor in September 2011. The abandoning of the exchange rate floor by the Swiss Central Bank and the subsequent currency appreciation are likely to have considerable effects on the Swiss economy.
Currency comparison with CHF as base currency from 2009
The possible outcomes of the above trend could be that Swiss based construction client’s increasingly procuring work from neighbouring regions such as Austria, Germany, France and Italy for procurement based work while Real Estate Investors seek to capitalise on the recent purchasing power of the Swiss Franc and invest in the safe haven of London. (See related article “Swiss Invest in London”)