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Sandy Li

Building costs are bottoming out after a 20 per cent drop from their peak levels in late-1997.

Despite the costs slide, surveyors say Hong Kong remains expensive when compared with Southeast Asian centres.

Developers are adopting innovative building methods to cut development costs and maximise profit margins.

According to the latest survey conducted by quantity surveyor Davis Langdon & Seah International, building costs in the third quarter last year dropped 1.6 per cent from the previous quarter.

Assistant director Lysander Lam said the chance of a further fall in costs was slim, and that they could fluctuate in the region by 1 per cent to 2 per cent.

She said developers would continue tightening cost controls because profit margins had been squeezed significantly by the market downturn.

Ms Lam said because building costs were unlikely to drop substantially and property prices were low, developers would tighten budgets for land acquisitions.

The situation threatened to further pressure land values, particularly in the New Territories, she said.

Davis Langdon & Seah and Levett & Bailey said in their latest reports that building costs for high-rise apartments in Hong Kong were about HK$808 to HK$947 per square foot, while costs for high-end flats were HK$910 to HK$1,200 per sq ft.

Building costs for high-grade office or commercial projects were at least HK$1,800 per sq ft, those for five-star hotels started at HK$1,600 per sq ft and those of industrial properties were about HK$510 to HK$557 per sq ft.

Hong Kong's building costs are higher than those in Singapore, Kuala Lumpur, Bangkok, Jakarta and Brunei.

According to Davis Langdon & Seah, the average cost for standard apartments in Hong Kong is HK$920 per sq ft, about 45 per cent more than to build the same apartment in Singapore (HK$505 per sq ft) - the second-highest in the region.

Levett & Bailey partner Yu Hon-kong attributed the difference mainly to the SAR's comparatively higher labour costs and the pegged currency exchange.

Costs in Singapore were lower because some of its labour was imported from Indonesia and Malaysia. Also, most Hong Kong buildings were high-rise which was a more expensive process than low or medium-rise projects in Singapore, he said.

Wharf (Holdings) marketing unit Harriman Realty director Ricky Wong said there was little difference in the quality of housing in Hong Kong and Singapore despite the SAR's substantially higher construction costs.

Hong Kong's higher labour costs and the widespread use of sub-contractors had driven up construction costs and these were unlikely to decline, he said.

To help alleviate the burden, developers were using modern building methods to enhance cost-effectiveness and reduce construction waste, he said.



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