Hong Kong ranks third globally for construction costs
In the Asia Pacific region, Hong Kong is once again the most expensive city to build, and now ranks as the third most expensive city in the world for building, after New York City and San Francisco, according to Turner & Townsend’s just released International Construction Market Survey 2018.
According to the report, “an emphasis [in Hong Kong] on boosting housing and infrastructure-supported growth, and with labor increasingly stretched, the market’s already historically high construction costs rose further and are expected to grow in 2018.”
Hong Kong — which surpassed Zurich this year to take the third spot in the annual survey — has an average construction cost of $344.47 per square foot, behind New York City ($362.70) and San Francisco ($347.54). Zurich, in fourth place ($339.64), and London, in fifth place ($336.47), round out the top five.
As with last year, Turner & Townsend considers Hong Kong a “warm” market — in the middle of the spectrum from “cold” to “overheated” — meaning there is decreased competition among contractors for work, leading to higher construction cost inflation. This is predominantly evident in “hot” and “overheated” markets, which are characterized by a high number of projects, intense competition for physical resources and labor that drives up costs. The firm’s future market outlook for Hong Kong indicates it will become warmer this year.
Other cities in the Asia Pacific region that are currently “warm” and expected to grow warmer this year include Bangalore, India; Beijing; and Ho Chi Minh City, with only Kuala Lumpur currently “warm” but growing colder. Three locations in the region are currently “hot,” with Tokyo and Melbourne “hot” and getting warmer, and Sydney’s construction market currently “hot,” with no change forecast. “Lukewarm” markets include Brisbane, Australia (no change); Jakarta (no change); Shanghai (getting warmer); Singapore (getting warmer) and Seoul (no change). Only Perth, Australia, ranked as “cold,” but is getting warmer.
Globally, only three markets are currently “overheating”: Amsterdam, Seattle and San Francisco, with no change expected for Amsterdam and Seattle, but with San Francisco forecast to grow warmer.
And in addition to the “hot” construction cost markets of Melbourne, Sydney and Tokyo, Europe’s Munich and Dublin are currently “hot,” with Dublin getting warmer and Munich expected to remain the same.
As talks of potential trade wars also heat up and cool down — almost on a daily basis between the United States and China — the construction industry, along with real estate investors, will be looking at possible tariff changes, particularly for aluminum and steel.