Overcapacity in the building industry and a weak rand have pushed SA building costs to historic lows against other countries.
The highest contract price of an air-conditioned office building in SA is now only US310/m² - 13% of the 2 350 cost in the US - according to a survey by international consultants E C Harris. It is only 42% of the $730 top cost in Slovakia, the next lowest on a list of 35 countries . Japan is the highest at $2 630/m².
'The price differential is at the point where it means multinationals will now open in SA because the setup cost is so low,' says Harris's head of cost research, Paul Moore. 'The low costs are reinforced by low labour costs, an important component of building.'
But it could also mean higher building-cost inflation: building costs rose 20,4% annualised last quarter.
Moore says there are also signs that SA contractors are using their price advantage to build up business elsewhere in Africa. 'With no funds for tourism or infrastructure, they are looking for outside opportunities, especially in the north,' he says.
Harris forecasts military construction will rise 17% this year as private property development slows down.
