Construction costs in The Netherlands in an international context

Abstract

OECD purchasing power parities (PPPs) are used regularly in strategic governmental policy papers to compare the performance of construction industries among countries. These PPPs suggest that the relative competitiveness of the Dutch construction sector is fairly weak compared with surrounding countries. This contradicts the general view that the Dutch construction industry is very productive and efficient, especially in house-building. For the member countries of the European Union the OECD uses data from Eurostat, the statistical office of the European Union. In this paper the methodology followed by OECD/Eurostat in their calculation of PPPs for construction is reviewed. The data for five European countries (Netherlands, Belgium, UK, France and Germany) are analysed. Next, the Eurostat results are placed alongside the results of other international building cost comparisons. The differences are observed and the conclusion is that the Eurostat PPPs do not reflect the real construction price or cost differentials among the five EU countries. It appears that the basic construction price data used by Eurostat are not very accurate, that the comparison methodology applied by Eurostat itself is insufficient to express and explain building cost differences among countries, and that the Eurostat figures for construction are the result of a complex statistical weighting and processing procedure in which corrections are not applied for extreme deviations. The conclusion is that the Eurostat data cannot be used for comparison purposes. Proposals for improvement of the comparison methodology are reviewed.