Hong Kong remains the most expensive city for construction in Asia 2017

International Construction Costs Report 2017: Cost Certainty in an Uncertain World

(6 March 2017, Hong Kong) Hong Kong remains the most expensive Asian city to build in, according to the International Construction Costs Index published today by Arcadis, the leading global Design & Consultancy firm for natural and built assets. Hong Kong moved up one position on the global ranking from last year, making it the second-most expensive city in the world in which to build behind New York.

The annual Arcadis index, which analyzes the relative cost of construction across 44 major cities, finds that world cities, including New York and Hong Kong, continue to be some of the most expensive locations in the world in which to build, but a slowdown in the global economy led by China and in resource economies, such as Brazil and Saudi Arabia, points to wider changes affecting the world’s construction markets.

Hong Kong markets are now stabilizing at peak activity level. The on-going and upcoming mega public infrastructure projects, such as the Zhuhai-Macau bridge link and the large-scale housing program that totals 480,000 units over 10 years, are expected to sustain Hong Kong’s construction industry workload at its current level. However, construction costs in Hong Kong have continued to rise until the end of 2016, mainly due to increases in labor costs.

Francis Au, Country Head for Hong Kong and Macau commented: “The rise of labor costs in the construction industry is mainly caused by the ageing workforce and labor force shortages. This issue is challenging to solve because solutions based on migrant labor are not acceptable to the local population. In order to stabilize the rise in construction costs, it is essential for the government and the construction industry to look into investing in initiatives and solutions that could increase industry productivity.”

The Asian cities ranking in Arcadis’ International Construction Costs Index are below:

Whilst economic growth levels in emerging Asian economies such as Malaysia, Indonesia and Philippines are way in excess of the developed world, growth rates in established hubs such as Hong Kong and Singapore are similar to those in North American and European cities. Growth rates in many Asian construction markets have eased significantly over the past 18 months mainly due to the peak in commercial and residential development rates. Looking forward, expansion at around 5%-7% per year is the best prospect for many construction markets in Asia.

Alan Hearn, Head of Buildings Solutions, Asia commented: “The future of the construction industry in Asia is looking bright. However, we believe that the construction industry drivers for the future will change. Four out of 10 highest value construction projects in 2017 are located in Asia. Among them are One Belt One Road (OBOR) initiatives and the Delhi Mumbai Industrial Corridor. Mega projects like these are mainly funded by public-private partnership (PPP) and will continue to fuel the development of the construction industry in Asia.”

The Ten highest value construction projects in 2017

The full report can be downloaded here.