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Hong Kong property

Hong Kong developers battle to rein in building costs, and avoid red tape

A 500 square foot flat in a normal high-rise building requires 150 tonnes of conventional concrete. With super-strong lightweight concrete, the building foundations will be 20pc cheaper, claims one firm

PUBLISHED : Sunday, 31 December, 2017, 6:03pm
UPDATED : Tuesday, 02 January, 2018, 4:54pm

Hong Kong is often trumpeted as one of the world’s most expensive cities in which to own a home, caught as it is in the perfect storm of limited land, dense population, and strong demand.

But another significant factor is often overlooked: the cost of construction here.

This year the average price of a flat has risen 14.2 per cent, a record high, according to the Centa-City Leading Index, a gauge of the secondary housing market.

“There are many reasons property in Hong Kong remains among the most expensive in the world. But bringing in modern building methods and modernising or re-designing the city’s approvals process could reduce costs significantly,” said John Webb, market director of built environment Asia at Aurecon, a global engineering and infrastructure advisory firm.

Building costs in Singapore and Sydney are both consistently cheaper than Hong Kong, according to the “International Construction Survey 2017” produced by global project manager, Turner and Townsend.

The cost of actually building a high-rise flat is US$3,371 per square metre in Hong Kong, while Singapore is 46 per cent cheaper at just US$1,803 per sq metre, and 35 per cent lower at US$2,169 per sq metre in Sydney.

Labour costs in Singapore are US$12 per hour, the same as Hong Kong, and soar to US$48 per hour in Sydney, according to the survey.

While Hong Kong is paying no more than others, relatively speaking, for building materials, “the unfortunate reality of its building industry is that participants understand and fear the difficulty of getting projects approved by the authorities, during design and construction”, adds Webb.

“There is a perception among some in the industry that the authorities tend to interpret the codes and guidelines too conservatively.”

For developers, the cost of a three-month delay in obtaining the right approvals can outweigh any savings made during construction, even if using “smart” design methods to cut material use, he added.

“It is little wonder, then, that developers appear to place greater value on reliability of procuring building approvals quickly than on smart, economical design. After all, their goal is to get the property to market as quickly as possible.”

In turn, some consultants respond by simply taking the path of least resistance in their design, building heavy, over-reinforced structures using the out-dated methods, which slavishly follow the prescriptive guidelines issued by the authorities, in some cases many years ago, he said.

Webb names London, Singapore and Sydney as being among the fastest countries to adopt modern and innovative construction methods, all of which have left Hong Kong’s levels of efficiency, speed and cost savings well behind.

It is little wonder, then, that developers appear to place greater value on reliability of procuring building approvals quickly than on smart, economical design. After all, their goal is to get the property to market as quickly as possible
John Webb, market director of built environment Asia at Aurecon

“And it’s Hong Kong’s residents who are paying the high price of not innovating,” said Webb.

Progress is being made by some forward-thinking building firms in the city, however.

Hip Hing Construction executive director Derek So, for example, says his firm has collaborated with the Nano and Advanced Materials Institute (NAMI) to develop what’s called “capsule technology”, its use of the next generation of super-strong lightweight concrete.

“A 500 square foot flat in a normal high-rise building requires 150 tonnes of conventional concrete. With super-strong lightweight concrete, the building weight will be 30 per cent lighter. As a result, the estimated cost for laying the foundations will be 20 per cent cheaper,” he said.

At the same time, the new generation of concrete can offer superior thermal and acoustic insulation properties, he said.

The 56-year-old Hip Hing – a unit of NWS Holdings, itself the service operation flagship of New World Development – recently built the luxury residential project The Morgan in Mid-Levels, and the Kerry Hotel in Hung Hom.

“It will also help property owners save with utility bills in future,” said So.

Derrick Pang, chief executive officer of Asia Allied Infrastructure Holdings – which developed the T-Plus residential development in Tuen Mun, famous for its much-publicised 128 sq ft flats – also said his firm now centralises its material sourcing, as a way of saving costs.

The firm, formerly known as Chun Wo Property Development, sold the entire T-Plus development to veteran property investor Tang Shing-bor for HK$1.2 billion in July.

“Previously, we allowed sub-contractors to source materials on their own once we won a building contract,” said Pang.

“But [on closer inspection] we found we were often ordering too much and our new system helps us control not only the quantity, but also the quality of the materials we use.”

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