Hong Kong has edged past Tokyo to become Asia’s costliest city for property development, driven by escalating construction expenses amid a worsening scarcity of skilled labor, according to a recent survey by UK-based consultancy Turner & Townsend.
The survey predicts Hong Kong’s average construction costs will rise by 4.8% this year, reaching $4,500 per square meter, placing it ninth globally out of 91 cities surveyed. Leading the global rankings are U.S. cities such as New York City at $5,723 per square meter, followed by San Francisco and Zurich.
Sumit Mukherjee, head of real estate, Asia at Turner & Townsend, cited a persistent shortage of skilled labor and sustained domestic construction demand as primary factors influencing Hong Kong’s ranking. The survey highlighted Asia’s broader construction challenges, pinpointing a region-wide deficit in skilled labor.
In Hong Kong, these challenges are exacerbated by demographic trends, with an aging population contributing to a projected shortage of up to 40,000 skilled workers by 2027, according to the Hong Kong Construction Industry Council. The city’s aging demographics and low fertility rates are anticipated to further reduce the overall labor force participation rate in the coming decades.
Meanwhile, neighboring Macao, another Chinese special economic zone, ranked second in Asia and twelfth globally with an average construction cost of $4,269 per square meter.
Turner & Townsend noted that while Japanese cities have historically topped the ICMS (International Construction Measurement Standards) rankings for construction costs, none made it to the top 10 globally in the 2024 survey. Tokyo ranked third in Asia, followed by Sapporo, Osaka, Hiroshima, and Fukuoka. This shift was attributed to the devaluation of the Japanese yen and modest economic growth post-pandemic.
Conversely, cities in mainland China benefited from abundant labor resources, helping to keep construction costs comparatively low. However, the country’s real estate sector faces significant challenges, including a downturn that has stagnated construction activity and tempered investor confidence.
The report concluded with uncertainty about China’s economic strategy amid these challenges, underscoring the unpredictability in its construction market’s future trajectory.
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