• Hong Kong's average building cost this year will rise 4.8% to $4,500 per square meter, ranking it ninth globally and first in Asia, according to Turner & Townsend.
• The city's construction industry has been suffering from a labor shortage amid an ageing population, according to experts.

Hong Kong has surpassed Tokyo as Asia's most expensive city to build property as rising construction prices add to a worsening labor crunch, a new market survey released by Turner & Townsend showed. 

The UK-based property consultancy projected that Hong Kong's average construction cost this year will rise 4.8% to $4,500 per square meter, ranking it ninth globally out of 91 cities surveyed. 

Only cities in the U.S. and Switzerland ranked higher, with New York City in first place at $5,723 per square meter, followed by San Francisco at $5,489 and Zurich at $5,035. 

"Skilled labor shortage and steady domestic construction demand are key influencing factors behind Hong Kong's ranking in our ICMS this year," said Sumit Mukherjee, head of real estate, Asia at Turner & Townsend.

The survey identified a shortage of skilled labor as Asia's biggest construction challenge more broadly.

This has been especially true in Hong Kong, with the city's construction industry facing a manpower shortage as the city grapples with an aging population. 

According to the Hong Kong Construction Industry Council, this skilled labor gap is expected to reach as high as 40,000 people by 2027.

Last year, the Hong Kong Census and Statistics Department projected that Hong Kong's aging population would get worse amid low fertility rates last year.

More than one in every three citizens is expected to be 65 or older by 2046, driving down the overall labor force participation rate, it said. 

Meanwhile, consultancy firm PWC said last year that the city's "significant labor shortage" was also a result of a surge in emigration and global competition for talent. Government measures aimed at attracting and retaining foreign and domestic talent were doing little to help the problem as of September.

Macao, another special economic zone of China, ranked 2nd place in Asia and 12th place globally, with an average construction cost of $4,269 per square meter. 

In Japan and China

Cities in Japan often grace the top of the ICMS ranking for construction cost, Turner & Townsend said, with the country constantly strained by the nation's aging population and longstanding labor shortage.

However, none of the Japanese cities made it to the top 10 global ranking in Turner & Townsend's 2024 survey, even though Tokyo was third in the Asia ranking, followed by Sapporo, Osaka, Hiroshima, and Fukuoka.

This was due to the devaluation of the Japanese yen, with the economy experiencing only moderate growth following the pandemic, Mukherjee said. 

Toward the bottom of the construction costs survey were cities in mainland China with an abundant labor force helping keep construction costs low, according to the consultancy group.

A festering real estate crisis has also sent China's construction industry to a near standstill, depressing demand and costs, it added.

"The Chinese government's response to its economic challenges is not yet clear, making the future of the market unpredictable and dampening investment confidence," the report said.