Nan Fung finds ways to reduce construction costs
Soaring labour charges and limited prospect for higher home prices forcing developer to adopt strategies to boost productivity and cut costs
Facing soaring construction costs and falling property prices, Nan Fung Development has had to adopt new strategies to maintain its profit margins.
Donald Choi Wun-hing, the company's managing director, said: "Construction costs have surged from HK$1,000 to at least HK$3,000 to HK$4,000 per square foot over the past few years.
"About 50 per cent of construction cost is wages for labour. Unless there is a policy to solve the problem of labour shortage, construction costs will continue to rise."
Research from quantity surveyor Langdon & Seah shows the cost of building luxury flats rose to between HK$2,787 and HK$3,252 per square foot in the third quarter of last year from HK$1,195 to HK$1,413 in the third quarter of 2009.
Development costs are increasing, but the upside potential for home prices is limited.
"It inevitably affects profit margins," Choi said.