Hong Kong Topples Tokyo as Asia’s Costliest City to Build

The city’s average building cost this year is projected to rise to US$4,500 per square metre, according to property consultancy Turner & Townsend

Hong Kong surpassed Tokyo as the most expensive city to build anything in Asia, as a post-pandemic labour shortage exacerbated the scarcity of skilled workers in an ageing society, inflating construction costs. The city’s average building cost this year is projected to rise by 4.8% to US$4,500 per square metre, according to a survey by the UK-based property consultancy Turner & Townsend. That places Hong Kong in the ninth position out of 91 global cities, behind first-place New York at US$5,723 per sq m and San Francisco in second spot at US$5,489 per sq m, according to the survey.

Hong Kong is not alone with the scarcity of skilled construction workers. A total of 72 markets, or 79.1% of the cities surveyed, reported labour shortage. Macau, less than an hour’s boat ride from Hong Kong, is in 12th place globally as a 3.5% inflation is likely to push the city’s construction cost to US$4.269 per sq m. “In 2024, we are seeing consistent trends across Asia in response to China’s economic slowdown,” Turner & Townsend’s Asia Head of Real Estate Sumit Mukherjee said, adding that this year’s global construction cost is expected to be inflated by 3%. “The shift to nearshore more manufacturing, to neutralise the impact of China’s slowdown, is creating significant growth and opportunities as other Asian markets invest in sectors like advanced manufacturing.”

In 2024, we are seeing consistent trends across Asia in response to China’s economic slowdown. The shift to nearshore more manufacturing, to neutralise the impact of China’s slowdown, is creating significant growth and opportunities as other Asian markets invest in sectors like advanced manufacturing.

Sumit Mukherjee, Asia Head of Real Estate, Turner & Townsend

Hong Kong’s government has long recognised the ageing problem in the city’s workforce, and has stepped up its replenishing programme, training more than 24,000 semi-skilled construction workers between 2009 and 2016. That helped to lower the average age in the industry to 46 in 2017, from 50 in 2013. That also helped to stall Hong Kong’s rise in the global rankings. Last year, Hong Kong dropped to 11th position globally just as the city was emerging from the pandemic, from the seventh position in 2022.

Five of the costliest cities to build are in Japan, reflecting how the real estate boom is straining under the nation’s ageing population and longstanding labour shortage. Tokyo is third according to Turner & Townsend’s Asia ranking, followed by Sapporo in Hokkaido Island, Osaka, Hiroshima and Fukuoka in southern Japan.

Chinese Property Market Unpredictable

Mainland Chinese cities languish near the bottom of Turner & Townsend’s global rankings, as a festering real estate crisis has sent the construction industry into a near standstill. Shenzhen, the Greater Bay Area City closest to Hong Kong, is the most expensive mainland location to build. Construction cost in the city of 17 million people is estimated at US$909 per sq m, ranked 83 places globally. Guangzhou, the provincial capital of Guangdong, is in 84th place, followed by Shanghai in the 85 place and Beijing in the 86th spot.

China’s gross domestic product growth is forecast to slow to 4.6% in 2024 from 5.2% last year as the country’s abundant labour force continues to keep costs low, according to the International Monetary Fund. “The Chinese government’s response to its economic challenges is not yet clear, making the future of the market unpredictable and dampening investment confidence,” Turner & Townsend said in the report. “In the construction sector, most Chinese markets remain near the bottom of the overall cost table.”