Rising Hong Kong construction costs require creative approach, says consultancy

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.