Beijing posts largest drop in construction costs amid weak demand

Construction costs in Beijing tumbled 10% over the past year amid weaker demand. This was the largest decline in the world and an acceleration of the trend that saw costs fall 5% the previous year, according to the International Construction Market Survey for 2016.

The report predicts that prices will remain stagnant in the Chinese capital over the next year.

Beijing construction cranes

Beijing construction cranes

The survey also said the housing markets of China’s regional trading partners are suffering a severe ripple effect from the slowdown in the commodities market and China’s economy. Countries that rely on exporting commodities to China have seen volatile construction costs amid the slowdown.

The annual survey analyzes input costs, such as labor and materials, and charts the average construction cost per squared meter for both commercial and residential projects in 38 markets around the world. The survey is produced by Turner & Townsend, a project- and cost- management company for the property, infrastructure and natural resources sectors.

Among the world markets that are overheating, Zurich tops the scale at nearly $3700 per square meter (m2), followed by New York at $3650 per m2, and London at $3550 per m2.

“Two macro-economic factors – the sharp fall in oil prices and China’s slowdown – have rippled across the global construction industry over the past year and triggered a rapid polarization of the market,” Steve McGuckin, Turner and Townsend’s global managing director of real estate, said in a written statement. “Some regions are now facing acute overstretch, with construction demand outstripping what the industry is able to supply. Meanwhile in markets with a heavy reliance on either trade with China or on commodities exports, both demand and levels of investment have fallen.

Meanwhile, in Hong Kong housing construction is strong with a number of large infrastructure projects planned to start, including a big spending push on rail projects.

Construction in India is booming and confidence is high. Infrastructure will be a key investment driver in 2016 with some game-changing projects in the pipeline.

Over the next 12 months, construction activity is expected to heat up in Kuala Lumpur.

In the past year, both Hong Kong and Kuala Lumpur saw their annual rates of price growth fall by 1%, and construction costs in Singapore stagnated.



Categories: Asia Unhedged, China, Hong Kong, Southeast Asia

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