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London is the most expensive city in Europe and the second most expensive city worldwide in which to build, according to the latest International Construction Costs Index published by Arcadis.

The Index reports that opportunism by contractors plus limited bidding resource has driven up construction prices in the capital meaning the cost for the construction of a five star hotel in London is 20% above that in Paris and 50% higher than in Dubai.

Yet despite the increasing costs London remains an attractive market to international investors who, along with strong domestic demand, are driving growth in bidding opportunities.

Demand is though filtering out to sub-prime areas of the capital as prime areas are no longer profitable to build on.

The Index from Arcadis analyses the relative costs of construction across 44 major cities and has ranked New York as the world鈥檚 most expensive place to build closely followed by London, while Bangalore and Taipei are the cheapest.

Arcadis UK client development director Simon Light said: 鈥淚n London, the recovery is losing momentum. With inflated construction costs and high land values threatening the viability of commercial and residential development, workloads look to be losing steam even before the capital鈥檚 infrastructure boom really takes flight.

鈥淒elayed investment decisions are reducing actual workload and we are seeing early signs of a return to reason in procurement. There is now much more focus on agreeing prices prior to starting on site, ensuring no loss of value should current construction volumes be maintained. We expect to see the rate of inflation fall to 4-5% in London for 2016 and for a real opportunity to 鈥榬eset the dial鈥� on projects coming forward in 2016 and 2017.鈥�

The most and least expensive for construction according to the index are: