Construction labour squeeze propels Hong Kong into third spot among most expensive cities globally to build
Hong Kong’s construction labour costs have vaulted 25 per cent in the last 12 months, elevating the city into the third spot among the most expensive to build globally, trailing only New York and San Francisco, and stoking concerns of runaway home price inflation.
The average construction cost in Hong Kong amounted to US$3,704 per square metre in 2017, up 6.2 per cent year on year, according to global project manager, Turner and Townsend.
Labour was the single largest driver of inflation in building construction costs, with the average hourly wage in Hong Kong rising to US$15 per hour, up 25 per cent year on year, according to the report.
In comparison, hourly construction labour costs in Singapore are US$13.
Vanessa Cho, quantity surveyor at Turner and Townsend, said that the shortage of skilled labour will further push up the construction costs in the city in the coming next few years.
“The public and private sectors are competing for the same resources from the same labour market. It is expected that with the shortage of skilled labour, wage costs will continue to increase and in turn further raise the cost of construction,” said Cho. “The challenge for the construction labour market is not just about the lack of numbers employed. The workforce is old, ageing and inflexible.”
According to the Hong Kong Construction Association, about 42 per cent of the Hong Kong construction workers are above 50.
It is expected that the construction costs will rise by another 4 per cent in the city in the coming 12 months.
“Higher construction fees will drive up the input [costs] of developers. Together, with the soaring land price, it is likely they will hold back completed units and only release the houses when the market price meets their expected return,” said Alvin Lam, a director at Midland Surveyors. “It will impact the home supply and thus may result in an even higher home price in Hong Kong in the coming years.”
Lam said that the construction cost usually account for 20 per cent of the price of a residential flat.
Hong Kong home prices have been surging for 24 consecutive months, the longest stretch for a property bull market in a quarter century. Market observers forecast 10 per cent growth in prices for 2018.
Still, Hong Kong’s high construction labour costs have been a regular fixture on the local development scene for some time. This year’s list saw Hong Kong climb one position, surpassing Zurich. New York topped the list with US$3,900 per sq m while San Francisco took the No 2 spot with an average construction cost of US$3,736 per sq m.
Around Asia, building construction prices in Tokyo averaged US$2,560 per sq m, while Singapore was US$2,137 per sq m.
On the mainland, Shanghai recorded the highest construction costs among major cities at US$807.3 per sq m.