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Sector's foundations erode

Published on Friday, 12 Apr 2013
Hong Kong Qianhai Shenzhen Zhaihai River Estuary Macau Zhuhai Too few young workers could spell disaster for Hong Kong firms looking to capitalise on China’s burgeoning construction industry, which is still seeing explosive growth, including the 18-square-kilometre new international financial zone of Qianhai, Shenzhen.
Photo: Edward Wong

Hong Kong is a regional leader when it comes to the construction of high-quality high-rise apartment blocks and office towers. As a result, construction firms based in the city find their services in big demand - not just in Hong Kong itself, but also throughout the region.

For jobseekers, that means lots of opportunities. They should be aware, however, that the industry faces serious challenges. Key among them is its ageing workforce. Younger workers are not being attracted to the construction sector in sufficient numbers because of what industry insiders refer to as the "3 Ds" - the work is dirty, it's difficult and it's dangerous.

Then there is the issue of pay. Construction workers in Hong Kong are not especially well paid, and the work is not always steady, which means there can be long gaps between jobs.

"We predict Hong Kong will face a critical construction labour shortage in the next five years," says Thomas Ho, council chairman of the Hong Kong Construction Association (HKCA).

The numbers speak for themselves. According to the Construction Workers Registration Authority, 40 per cent of Hong Kong's 300,000 registered construction workers with valid permits are 50 years of age or older. The HKCA, meanwhile, says that 68 per cent of construction workers are 40 years of age or older, while less than 10 per cent are under the age of 30.

As well as Hong Kong being a regional leader in construction, its architecture industry is also held in high regard. Many Hong Kong-based architectural firms are involved in various projects throughout the region, especially in China. According to reports from the Hong Kong Trade Development Council, from 2005 to 2010, the city's exports of architectural, engineering and other technical services doubled, from HK$1.04 billion to HK$2.23 billion.

According to Jango Wong, senior associate at design studio Woods Bagot, the Pearl River Delta - and particularly Qianhai - offers architecture design professionals the most immediate business opportunities. In the long term, however, he believes that architecture and building services would benefit from CEPA (the Closer Economic Partnership Agreement between the mainland and Hong Kong) to be extended to the architecture and design professional area.

"I believe stage one [of CEPA] has been limited to legal and financial services, which allows Hong Kong professionals or co-operates to work in Qianhai," Wong says. "There are reports suggesting building engineering [from Hong Kong] may be able to operate in Qianhai district only [and not in other CEPA areas in China]."

In addition to China, Southeast Asia also offers many opportunities for Hong Kong-based architectural and design professionals. Here, though, daunting challenges also exist. Working across different jurisdictions is not for the feint of heart, while the internet is also proving to be a major game-changer.

"Differing building codes, submission procedures and interfacing with both local and international working partners are among the challenges for Hong Kong architects managing overseas projects," Wong says. "Geographical distances have less of an impact now because of the changes that have taken place since the advent of web-based communication. This is working on a pretext, though, that language will not be an issue in hindering collaboration."

The field is also becoming more and more globalised, with consultants from all over the world often co-operating on the same project.

"The key challenge and opportunity is how to bring consultants from different building-code jurisdictions to work on a project that is in a foreign location with different geography and judiciary," Wong says. "It requires the team to appreciate a different set of criteria that drives the respective building code, and to find a solution for a particular problem. We also need to work on the level of what the underlying concerns of a particular code are, rather than simply applying and referring to the code."

According to Denis Ma On-ping, local director of Greater Pearl River Research at Jones Lang LaSalle, the market is filled with uncertainty.

"Market participants now not only have to deal with volatility in the global economy, but also with heightened policy risk," Ma says. "Investment volumes have fallen noticeably since the government doubled stamp duty costs and began to impose stamp duty on sub-sales of non-residential properties in late February."

According to the latest Land Registry data, monthly residential sales transactions dropped by 28.1 per cent month on month in March, but this data is mostly a reflection of transactions completed in February.

"Our own analysis of market data for residential properties worth over HK$20 million showed a 69.9 per cent month-on-month decrease in March, with similar declines being recorded in the commercial and industrial property markets," Ma says. "Supported by low holding costs, vendors initially held firm on prices despite the drop in investment volumes. More recently, however, there have been signs of vendors softening asking prices and some instances of speculators selling at a slight loss."

Clearly, the latest government efforts to cool down the market are having some effect.

"In our opinion, the increase in transaction-related stamp duty costs has had the greatest impact in cooling market exuberance," Ma says.

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