Market Update 2018Q1: Hong Kong & Asia
Posted by Richard Poulter on Tuesday, April 24, 2018
During the fourth quarter of 2017, the Hong Kong construction market saw its slowest period of growth since 2010, despite the overall economy growing. This is mainly due to land resources continuing to be limited – affecting public housing plans in the medium term – and fewer large public infrastructure projects in the pipeline. However, many private projects are on the horizon for 2018, and the government’s infrastructure plan should boost growth by up to 20% by the end of the year with Civil Engineering and Development Department's upcoming contracts for transportation and water management works.
Materials Costs
The costs of materials in China rose sharply in this period, with materials such as ready-mix concrete and Portland cement seeing the biggest increases – 13% and 29% respectively. Steel reinforcement also increased by 8%, while copper stayed reasonably stable with an increase of around 3%.
While materials prices have been rising steadily since late 2016, the marked increase in the fourth quarter is likely due to the restrictions put in place by the government to address air pollution during winter. Cement and steel plants were either closed or had restricted operations in order to cut emissions, decreasing the supply of these materials.
Labour Costs
Despite the slow growth, construction wages have increased for the ninth year in a row amongst structural, mechanical, electrical, and architectural professionals. While the percentage of increases is still modest compared to 2011 increases – 4.5% as opposed to 15% - the continued rise in labour costs is good for workers.
The median monthly earning for construction workers in Hong Kong reached its highest ever peak at just over 18,000HK$. This earning potential combined with the continued steady increase in wages may be enough to attract more young workers to the industry, as over two-thirds of the workforce are aged 40 and above and only 6.8% of workers are between 15–25.
Gross Value of Construction Work Performed in China and Hong Kong
Although the fourth quarter typically is the strongest performer of the year, 2017 saw record values for work performed across all measured areas in China: building, building services, and maintenance and other miscellaneous construction activities.
In Hong Kong, quarter 4 figures are yet to be released. However, values of work performed up to quarter 3 appear slightly higher than in 2016 across public sector and other sites. Private sector sites remained similar to 2016 figures. This less-than-expected uptrend likely reflects the effects of the winter shutdown period.
Approximate Building Costs for Major Cities in Asia
In China, Shanghai and Beijing top the charts for building costs for domestic and commercial buildings, with a standard high-rise apartment costing up to RMB 5056/m² and (approximately US$ 800/m²). However, industrial buildings were more expensive to build in the Guangzhou/Shenzhen and Chongqing/Chengdu regions, perhaps unsurprisingly as these are more industrialized areas.
Across Asia, Hong Kong continues to have the largest housing costs compared to Singapore, Kuala Lumpur, and Bangkok, with costs up to US$ 3620/m² for a standard high-rise apartment. However, Macau is only slightly cheaper, particularly on high-end domestic housing – costing up to US$ 6040/m² compared to US$ 6220/m² in Hong Kong. This trend could also be seen across the commercial, industrial, hotel, and miscellaneous building types as well.
By contrast, the same standard apartment could cost up to US$ 1510/m² in Singapore, US$ 864/m² in Bangkok, US$ 1088/m² in Manila, and just US$ 520/m² in Kuala Lumpur. Even luxury 5-star hotels in these areas are approximately a third of the cost of those in Hong Kong and Macau: around US$ 2000/m² on average.
Outlook for 2018
Overall, however, construction in Hong Kong and Asia looks to be a good market for construction professionals in 2018, with the continued pay increases and shortage of qualified labour. New large projects are starting throughout the year, such as the recently begun Hong Kong International Airport Third Runway System and the upcoming Kai Tak development.
If you are looking for your next move within Hong Kong and Asia, register your CV with us to keep up to date with the latest vacancies.
Richard Poulter
Recruitment Director, Hong Kong
I am responsible for the recruitment business in Hong Kong, Asia, and the Middle East. I was a civil engineer and project manager for 15 years before becoming a construction industry recruiter in 2004. I am based in the Hong Kong office and excel at placing professionals in engineering, project management, planning and HSEQ/risk.
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Email: richard@maximrecruitment.com