Macau ranked second most expensive market for construction in Asia last year, according to the latest International Construction Costs Report by Arcadis, a global natural and building asset design and consultancy firm which assessed some 43 locations in terms of the construction cost of 13 building types.
The report shows that the construction cost in Macau, which topped almost the most expensive on the continent, was only cheaper than in its neighboring city of Hong Kong. Meanwhile, in global terms, Macau occupies 11th place, a significant drop of six places, compared to 2013, while Switzerland and Denmark are the two most expensive markets in the world, followed by Hong Kong.
Nevertheless, the drop of Macau’s ranking in global markets does not represent a decline in the Special Administrative Region’s construction costs in the past year. Rather, costs continue to increase and is likely to keep climbing this year, given the fact that a number of big casino projects are under construction.
‘The construction industry is still booming as a result of the current wave of casino development. With construction wages having risen 13 per cent a year in Macau, labour costs continue to be the key driver in escalating construction costs’, the firm told Business Daily via email.
Factors driving cost up
In fact, the firm is not the only one foreseeing a hike in the city’s construction costs. The director of the Association of Building Contractors and Developers, Paul Tse See Fan, told Business Daily yesterday in a phone interview that the increasing amount of infrastructure and the rising demand for construction materials and human resources are also factors triggering high building costs, in addition to the expansion projects of the gaming corporations.
“Many big hotel projects are under construction. The gaming corporations usually want to reach the profits fast. As such, they will offer higher pay to contractors, which pushes construction costs up. The increase in the supply of hotel rooms by between 20,000 and 30,000 in the coming two years is also adding pressure to costs.
As such, even [with] gaming profits having dropped, it is not going to affect long-term development. Relaxation of construction costs may be seen in the future but not a significant drop”, the Association head said. “Meanwhile, the government has also increased the supply of public housing to respond to the demands of society… As such, they are requiring construction to go fast, which has also driven construction costs up”, he added.
In addition, Mr. Tse indicated that Macau’s construction costs are also affected by the construction industry in Hong Kong. “Before, Hong Kong did not have too many big projects; technical staff and companies [there] might go to Macau.
Following the number of infrastructure [projects] increasing in Hong Kong, such as the MTR, Hong Kong-Zhuhai-Macau Bridge, the [resources] are not enough to serve the demands of [the two cities]”, he said, noting the increasing amount of infrastructure in Macau, Hong Kong and mainland China increasing the cost of construction materials, such as concrete and sand, which are in large demand.
The Association head added that the city’s human resources are inadequate to deal with the number of public housing and other infrastructure constructions, pointing out that the lack of manpower is another important factor driving Macau to post high building costs.
In fact, the lack of manpower, indeed, may have driven labour costs for construction. According to the latest data from the Statistics and Census Service (DSEC), during the third quarter of 2014 the nominal wage of construction workers jumped nearly 11 per cent year-on-year. For local construction workers, salaries surged 20 per cent year-on-year, more than double compared to their salary in 2010.
Meanwhile, the price of major construction materials, such as sand and concrete, jumped 17.9 per cent and 17.1 per cent per cubic metre, respectively, in the same period over that of 2013, according to DSEC.