Following a year of civil unrest in 2019, the Hong Kong construction industry is expected to contract by 9.2 per cent in 2020 due to economic weakness caused by the COVID-19 pandemic. The Hong Kong Buildings Department reported that no construction was started on new projects in the first two months of this year, the first time since records started in 2002, according to a report in the South China Morning Post.
The government will continue to invest in infrastructure with an estimated annual expenditure of over HKD 100 billion in the next few years. These funding will help the industry to overcome the economic challenges by meeting the demand for financial support from front-line construction enterprises facing acute financial challenges.
Total construction starts are anticipated to register a 4.60 per cent growth in 2021, following a difficult year that saw the emergence of the pandemic. A contraction in construction start values of 1.85 per cent in 2020 is seen mainly because of restrictions as a response to curb the spread of the virus which affected project sites, the delivery and shipment of building materials, and the mobility of labourer and workers. The Hong Kong construction market is anticipated to reach HKD 244,341 million in 2021, 70 per cent of which are building sector activities, while 30 per cent are from civil.
The office, retail, industrial and hospitality sectors are forecast to decline at around 6-12 per cent, while the health and recreation sectors are seen to achieve a 12 and 178 per cent growth respectively. In the other hand, total civil sector developments composed of infrastructure and utilities are predicted to drop by 3.70 per cent.
Despite the recent upsurge in the pandemic cases, the year-end forecaster report shows positive sign of recovery as construction industry remains a vital component of the local economy. Residential construction is the key part in the building sector. In 2020, property market sentiment has been volatile due to the pandemic. But it is estimated that residential construction will remain strong in 2021 as demand for property is still solid from the local resident.
According to the latest Citi Residential Property Ownership Survey, 10 per cent of residents polled consider it a good time to purchase a property, among the highest levels on record over the past nine years and is illustrated by nearly 400,000 people touring new home developments in the past month.
Should the COVID-19 vaccine be available by mid-2021, the construction industry is expected to regain positive momentum in the second half.
Data source: BCI Asia Hong Kong Research & Economics