Cape Town is experiencing significant growth in residential, lifestyle estates, eco-tourism, retail, hotel and leisure, and mixed-use developments, driven by migration to the province. Durban has shown robust activity in residential, basic infrastructure, and agriculture sectors in rural areas, while retail, hospitality and tourism are expanding along the coast. The industrial sector continues to flourish in northern KwaZulu-Natal.
Tender prices across central Africa have risen moderately, driven by material costs, inflation and demand. Local production capacity for key materials such as cement and steel remains limited, with weak local currencies exacerbating costs.
In South Africa, Johannesburg faces price volatility in global materials, labour shortages and rising power costs. In Cape Town, limited availability of locally sourced materials, combined with high demand, has led to construction prices being approximately 10% higher than in Johannesburg. A scarcity of large and medium-sized general contractors and subcontractors is further driving up prices.
Looking ahead to the next 12 months, central Africa faces political instability and security concerns that may delay projects, disrupt supply chains and deter investors. Contractors are likely to factor risks into pricing, leading to increased costs. Higher insurance premiums and logistical challenges may also contribute to rising prices.
In South Africa, the Government of National Unity formed after the 2024 elections has reduced uncertainty slightly, boosting investor confidence. Two recent interest rate cuts are expected to further support the construction industry. While power supply has stabilised somewhat, lowering input cost pressures, power prices and fuel costs remain high.
Common challenges across the region include a lack of skilled labour, inadequate infrastructure and political instability, which continue to hinder project completion. Nonetheless, the easing of inflation and a gradual resurgence in investor confidence signal potential opportunities for growth.
Evan Sim
Director,
RLB Africa
evan.sim@za.rlb.com
The fluctuating prices of metals remain a concern, even though the prices of most commodities have stabilised. Contractors are preparing for possible effects on materials like steel, lumber and MEP components as the prospect of broad tariffs under the Trump administration continues to hang over the producer price index.
One persistent issue is a shortage of workers. According to a recent Associated General Contractors of America survey, over 90% of contractors say they have difficulty finding both salaried and hourly jobs. Last year, those figures were in the 80% range. Yet, large projects, like data centre campuses, offer appealing long-term job security leading workers to accept moderate wages. As a result, salaries have stabilised as more workers flock to these projects.
Inflation may rise again in 2025, which could keep financial pressures elevated. Currently, inflation remains significantly above the Federal Reserve’s target of 2%, indicating that the Fed will likely struggle to justify additional rate cuts in the future. This guarded outlook reflects the Fed’s actions at the end of last year. In December 2024, the central bank cut rates for the third time that year, signalling a preference for less monetary easing in 2025.
The market is expected to remain stable but cautious, with continued demand from the public sector and increasing pressures on labour and material costs. Interest rate cuts are anticipated to bolster demand by mid-2025, particularly for public infrastructure projects. The forecast for total US construction spending in 2025 is 8.5% growth. This increase is primarily driven by a positive economic outlook, robust government spending and falling interest rates, all of which support growth in both the residential and non-residential building sectors.
Antonio Gonzalez
Research Cost Analyst,
RLB North America
antonio.gonzalez@ca.rlb.com
While the real estate market shows a subdued sentiment with decreasing demand for houses and apartments, the office and retail sectors are also struggling in the face of broader market challenges. Conversely, the industrial sector is gaining momentum, buoyed by diversification of China’s manufacturing base and increasing demand for smart, digital and sustainable industrial facilities.
Noteworthy is the surge in demand for data centres in the Greater China region. Additionally, infrastructure projects are on the rise, backed by government efforts to meet the 14th Five-Year Plan objectives by 2025. Meanwhile, the healthcare and aged care sectors are positioned for growth.
The region showed a mix of stability and decline in tender prices. A decline in costs of major construction materials, such as concrete and steel, influenced the drop in tender prices in China.
The likelihood of contractors submitting more competitive bids to sustain their project pipelines may contribute to a stable or slightly decreased tender price index in the year ahead. But the industry also faces a looming challenge posed by the ageing demographic within its workforce. This is likely to exert upward pressure on labour costs as companies compete for a limited pool of
qualified workers.
The integration of advanced technologies such as AI and robotics presents opportunities for increased efficiency and potential cost reductions in the long term. However, the initial phase of learning and implementation will require upfront investments in both time and resources. While these technologies have the potential to optimise the construction process once fully matured, the industry may experience upward price pressures during the transitional phase of technology adoption.
Anderson Chan
Managing Director,
RLB North Asia
anderson.chan@hk.rlb.com
Candy Wong
Senior Cost Estimator,
RLB North Asia
candy.wong@hk.rlb.com
Investment is anticipated to flow into most market sectors, with infrastructure, industrial developments and data centres expected to see the greatest benefits. The renewable energy sectors in Singapore and Malaysia are likely to experience substantial growth. However, each market in the region faces distinct challenges, from lack of tender competitiveness to vulnerability to global economic fluctuations.
In 2024, tender prices across Southeast Asia showed upward movements, albeit to varying extents, influenced by material costs, labour dynamics and market conditions. Projections for 2025 indicate that this trend will persist, with tender prices expected to rise by 0% to 7%, the wide range reflecting differences in local tendering climates. Material and labour costs, though largely stabilised, remain elevated.
Singapore’s tender price escalation remained flat throughout 2024, driven by stable material costs and a slowdown in labour cost inflation. Increased tendering opportunities and heightened competition helped moderate price growth over the past year. Construction demand in 2025 is projected to increase by 6% to 20% compared to 2024. Assuming downside risks do not materialise, the steady pipeline of projects is expected to exert modest upward pressure on tender prices.
In Kuala Lumpur and Ho Chi Minh City, tender price escalation in 2024 was reported at 3% to 5% and 2.1%, respectively. This is projected to increase in 2025 to 4% to 7% and 3.5%, respectively. Conversely, Jakarta’s tender price growth is expected to remain stable at 3.2%, consistent with the previous year.
Meanwhile, Phnom Penh is expected to experience a slowdown in tender growth, decreasing from 4.1% in 2024 to 2.2% in 2025. While material costs and labour availability remain key drivers of tender price escalation in these cities, macroeconomic and commercial factors such as general inflation, contractor solvency and exchange rates are exerting a growing influence in 2025.
Tay Wan Ding
Research Associate,
RLB Singapore
wd.tay@sg.rlb.com
Continued geopolitical issues are not helping, with proximity to the far eastern side of Europe ramping up risk and damping investment. Beyond construction, the economies of northern Europe are experiencing ongoing low levels of GDP growth, which stifles investment, so the impetus to move forward may well derive from the need to house increasing populations, already an urgent task, and the further developing need to move more toward greening of the economy.
For the UK, the mid-year change of government and subsequent statements of commitment to growth of the wider economy have led to construction refocusing on building new homes and infrastructure to facilitate inward investment. In parallel, the government is seeking to simplify the planning regime, with an assumption in favour of development being inbuilt into the review process in areas deemed to have the potential to improve access and activity in commerce and industry. Nonetheless, planning and procuring take time, and the need for ‘shovel-ready’ projects is pressing.
At the same time as a 4% fall in work output over the last year, with infrastructure work down by more than 9%, we have seen significant increases in insolvency rates in the contracting and subcontracting sectors. Also, new orders for this last year are down by over 5.5%, with housing down over 17%.
As a consequence, tender price uplift has been muted and any stimulation to the economy would be well received. However, for contractors and subcontractors alike, the recent uplifts in employers’ National Insurance costs can have done nothing to ease their cost base, which no doubt will eventually be passed through to clients in uplifted tender prices.
Roger Hogg
Senior Associate,
Research and Development Manager,
RLB Europe
roger.hogg@uk.rlb.com
Strong population growth, driven anecdotally by regional and global conflicts, and a robust tourism industry have increased demand in UAE’s real estate sector. To cater for the booming industry, the UAE government is planning significant investment in the infrastructure and digital sectors.
In KSA, real estate costs have increased by 81% since the start of the pandemic due to high demand driven by the Vision 2030 target to achieve a 70% homeownership rate. To address the affordability challenges, several schemes have introduced mid-market developments.
Inflationary pressure remained relatively stable in the UAE during 2024 as numerous projects remained in the design phase. However, inflationary pressure is expected to increase during 2025 as projects move into the procurement phase. Qatar, going through a period of adjustment following the FIFA World Cup 2022, has experienced a downward trend in construction costs. In KSA, the value of main contract bids doubled between the first and fourth quarter of 2024, according to information published by MEED. High demand for construction bids has resulted in consistently high inflationary pressure which is expected to persist during 2025.
The industry’s outlook remains positive despite economic challenges. The US has announced that local oil extraction will be promoted and uncertainty in the region’s oil market will lead to price volatility. Persistently high demand for materials, plant and labour in KSA has had a ripple effect, increasing construction costs across the region, and this trend is set to continue in 2025. Local contractors have expressed concern that hikes in the cost of diesel could significantly increase construction costs across all sectors.
Yusuf Kurrimboccus
Director – Cost Management,
RLB UAE
yusuf.kurrimboccus@ae.rlb.com
Wihann Mouton
Associate,
RLB KSA
wihann.mouton@sa.rlb.com
Skilled labour shortages are another critical issue for both economies. The decline in building approvals in the backend of 2024 signals a reduction in new projects commencing, which may ease the labour predicament. Economic uncertainty and higher costs are deterring investment in new construction, contributing to this downward trend. Despite these challenges, the value of construction work in Australia remains high, indicating a substantial backlog of projects that need to be completed.
Market conditions across Australian cities are diverse but generally challenging. Some areas are experiencing pricing stabilisation for certain project types, yet overall, cost escalation pressures persist. Strong demand for labour and materials, supply chain issues and global inflationary trends are driving construction costs up. The lack of competition among contractors is inflating project costs, while low productivity and labour shortages are extending project durations, with a high risk of industrial action and insolvencies. The industry is overrepresented in the number of insolvencies and this risk is passed on in the form of risk allowances in tender submissions.
Price pressures in New Zealand have materially reduced in the construction sector, and the weak demand environment continues to put downward pressure on prices. This suggests further easing in construction cost inflation over the coming year. Construction activity in New Zealand fell slightly in the June 2024 quarter, reflecting a small decline in both residential and non-residential construction.
In Australia, there are opportunities for growth through innovation, government support and strategic management. By embracing new technologies, focusing on sustainability and effectively managing resources, Australia’s construction industry can navigate the complex landscape and continue to thrive. New Zealand’s near-term outlook for construction demand remains weak, but forecasted population growth and lower interest rates should support a recovery in construction demand from late 2025.
John Cross
Manager – Research and Development,
RLB Oceania
john.cross@au.rlb.com
