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Hong Kong & Macau’s Rising Construction Costs

Hong Kong

Hong Kong is one of the most expensive places in the world to live and work. It is also one of the most expensive in terms of construction costs. In recent years Hong Kong’s construction industry has seen output reaching record levels; this is a result of growth in both private and public sector works. High levels of public sector investment into the MTR and high speed rail link to China have created a boom period. This boom period has seen rising construction, which are partly associated with labour shortages.

In a recent survey Hong Kong was only surpassed by New York and London in the International Construction Market Costs Survey. However, it is believed that the city's building costs could rise by up to another 7.5% in 2016. The areas of construction included in the survey included: high-rise apartments, commercial office space, warehouse and distribution centres, healthcare facilities, education facilities and shopping centres. Residential development costs were among the most expensive with an average cost of HK$24,000 per m2; this still over 25% below London, but around 5% cent higher than in New York. Although not a common form of housing in Hong Kong, building upmarket detached houses in Hong Kong is considered the most expensive in the world.

Surprisingly, in terms of building costs for commercial office space in the central business district, New York and London occupied the first and second places whilst Hong Kong came in seventh overall.

One of the main reasons for increasing construction costs is labour. With a large work load of live projects ongoing in Hong Kong there is often a shortage in the local talent pool of suitably skilled workers to undertake the work. Candidates often have 2 or 3 potential employers to choose from, allowing them to negotiate higher salaries. Moving forward, Hong Kong faces the challenge of an ageing and shrinking workforce where nearly 30% percent are aged over 55, and as the pressure mounts on the government to award more major infrastructure projects in Hong Kong, the costs of construction and labour looks set to increase further. Not only are these labour shortages pushing costs higher but they are also resulting in significant project delays as we have seen in the Express Rail (XRL) MTR project.

Macau


As a close neighbour to Hong Kong Macau is now the second most expensive Asian city to build in behind Hong Kong., with Singapore ranking 3rd. Macau is subject to less-than-ideal market pressures which inflate costs in the construction sector. In recent years construction projects for casinos, hotels, and land reclamation works were in high demand there, while a lack of space and available labour to satisfy this demand applies upward pressures on costs.

One of major challenges Macau has faced in previous years has been attracting suitably skilled candidates to live and work in the region. Government restrictions on visas for foreign nationals has made the task even harder, this coupled with trying to compete with Hong Kong which is seen as a much more attractive life style proposition, has seen labour resources in Macau become a major problem in recent years.

As the major casino and hotel developments are now coming to an end it looks like Macau is set for a relatively quiet few years in terms of construction output. This could now be ideal time for Macau based workers to move across to Hong Kong. If you’re based in Macau and are interested in working in Hong Kong please get in touch and we’d be happy to discuss the opportunities available.

Key Facts

HONG KONG’S AGEING WORK FORCE:

  • Aged 15 – 24: 8%
  • Aged 25 – 39: 26%
  • Aged ≥ 40: 66%

As you can see the construction work force is ageing, with over 65% being aged 40yrs or old, this is likely to lead to problems in future years with a lack of available local candidates to fill positions providing more opportunities for overseas candidates wanting to work in Hong Kong.

CONSTRUCTION COSTS (MOST EXPENSIVE IN SELECTED BUILDING CATEGORY):

  • Domestic Building Type:Detached House: 43,000 – 49,500 HK$/m2
  • Office/Commercial Building Type: Retail Malls: 32,300 – 38,300 HK$/m2
  • Industrial Type: Factories: 18,600 – 23,800 HK$/m2
  • Hotels: 5 star: 38,200 – 44,500 HK$/m2
  • Others: Hospital Facilities: 39,700 – 45,200 HK$/m2

CONSTRUCTION WORKS PERFORMED PER SECTOR (HK$ MILLION) YEAR ON YEAR:

Private Sector Sites

YEAR

2006

2007

2008

2009

2010

2011

2012

2013

2014

VALUE

25,000

29,000

33,500

33,500

30,500

35,000

49,000

49,500

54,000

Public Sector Sites

YEAR

2006

2007

2008

2009

2010

2011

2012

2013

2014

VALUE

17,000

14,500

15,500

18,500

31,000

42,000

54,500

62,000

69,000

Others

YEAR

2006

2007

2008

2009

2010

2011

2012

2013

2014

VALUE

48,000

49,500

51,000

48,500

50,000

51,000

57,500

65,000

77,000

TOTAL ANNUAL

YEAR

2006

2007

2008

2009

2010

2011

2012

2013

2014

VALUE

91,500

93,000

100,000

100,500

111,500

128,000

161,000

176,500

200,000


Hong Kong has seen a year on year increase in the number of construction works performed, with substantial investments made in both private and public sector projects.

As Hong Kong continues to see significant growth in new construction projects with high costs and an ageing work force, the job opportunities for construction professional, both expatriate and local, looks set to remain strong. If you’re interested in new job opportunities in Hong Kong or want to know more about the construction market outlook in 2016 please get in touch and we’d be happy to speak with you.

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HONG KONG
MACAU


Tim Cole
Maxim Recruitment
Hong Kong Office – Covering Asia Region

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