Rising Hong Kong construction costs require creative approach, says consultancy

Imported workers and new methods of building may offer solutions to industry, experts say

PUBLISHED : Tuesday, 21 October, 2014, 6:33pm
UPDATED : Wednesday, 22 October, 2014, 5:03am

Rising building costs in Hong Kong show no sign of abating, with construction inflation consistently exceeding the city's overall inflation rate, consultants say.

With the sector struggling to find a solution in the short term, the adoption of more efficient design and building practices - with the help of technology - offers a longer-term way of managing cost pressures, said Malcolm Johnston, an executive director of international construction consultancy Langdon & Seah.

Construction inflation in Hong Kong in 2013 was 9 per cent for building works and 7 per cent for civil engineering works, according to the firm. This contrasts with the city's 4.4 per cent inflation rate last year.

Johnston said these costs are expected to rise further, with an estimated 7-10 per cent growth rate this year. The slower expansion in the housing market could trim the growth rate to 6-8 per cent next year, he said, but that was still likely to exceed the city's overall inflation rate.

Construction cost cycles fluctuate due to a variety of factors including labour supply, general capacity of the industry, demand volume and commodity prices.

Labour is a key factor, said Thomas Ho, chief executive of Gammon Construction.

With Hong Kong facing a shortage of 10,000 construction workers, the government has started exploring long-term solutions to the labour shortfall, including the possibility of importing workers. But Ho said that progress was extremely slow and wages kept rising.

Johnston said imported labour may be part of the solution. The shortage also stems from an ageing workforce and lack of new blood coming into the industry.

Johnston suggests efforts to promote efficiency, such as tapping into 3D modelling technology, may prove more promising.

He cites the benefits of Building Information Modelling (BIM), a 3D model-based process that he says facilitates project management and execution, better construction process control and cross-disciplinary collaboration. All this enables faster construction, Johnston said.

"Building Information Modelling is definitely part of the solution," he said. "It will be the next big thing [in the industry]."

However, Ho said that while BIM would help, it would take a long time to develop, leaving short- and medium-term problems unaddressed.

Johnston said that prefabrication also offered a way to improve construction productivity, which has been used extensively in public housing by the Hong Kong Housing Authority. But, so far, private developers have shied away from prefabrication.

"At the moment, we do not see much use of prefabrication in private developments in Hong Kong - residential or commercial, except prefabricated facades (such as precast concrete or curtain wall)," Johnston said.