Tuesday, December 22, 2009

Observations about Hong Kong

Here are some observations about Hong Kong and lessons for Singapore.

4 comments:

Anonymous said...

<<< ....our housing prices have gone up enough to overcome the high cost of constructing such residential 'skyscrapers'.... >>>>

This is a valuable lesson for me, thanks for the article.

Redstar said...

5:02 pm may be mislead by this article on construction costs.
1. In theory, costs should decrease over time and not increase. The technology and investment in research are paid off and improve building efficiency e.g. use of machines, organizing efficiency with computers/AutoCad and cell phones (instead of pagers). As example, PCs are cheaper now than in 1999. Same goes for cell phones, LCD TVs, cameras etc.
2. With flats rising to 40 levels instead of 12, the land cost is distributed over more units. So, land cost should be cheaper, right?

3. A 4 room condo unit in JB Malaysia costs around $250K. Freehold with big balcony and yard. Therefore, construction cost is well below $250K.

My conclusion is the margin for developers is obscene. For a HDB unit at Duxton, Tanjong Pagar; my estimate is for a unit sold for $600K, the profit for the developer is at least $350K. Taking into consideration our higher productivity and efficiency, although our land price is higher.

Hence, I call the end of Singapore's Golden Era. Really hope I am wrong on this one.

Anonymous said...

Redstar,
your opinions do not include the construction of skyscrapers. These high rise buildings are costly to construct therefore you do not see them in abundance anywhere in the world. Only when land cost is expensive, or when the builders want to pass the cost to the apartment owners, then it makes economic sense to build them. (another factor is the plot ratio control by the government)

Therefore, as owner willing to pay more, there is no barrier to build taller building.

Redstar said...

10:44 pm

Which is why I said our land price is higher and the skyscraper technology has matured.
The Swissotel Stamford was completed in 1986 with 73 storeys whereas the present Pinnacle@Duxton (2009 estimated completion) stands at 50 storeys.
The increase in construction cost for high rise building is largely offset by the gains (of more units sold).

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