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(Last updated: 28 Feb 2008)
Trends and opportunities
The market
Hong Kong is a dynamic commercial and financial centre with a slow growing population, currently at around seven million. The building, construction and civil engineering sector is large and competitive. Approximately half of the population live in subsidised public housing and the Hong Kong public continuously rate housing as a priority which is predominantly high rise apartment blocks with very few stand alone houses. Both the public and private sectors carry out housing works.
Hong Kong is a regional leader in the building and construction sector, particularly known for its ability to rapidly construct high rise apartments. This capacity is predominantly attributed to specialised construction techniques, such as reclamation and design-and-build methods. Its export market is generally Asia, principally mainland China.
The main service categories of the domestic market include project management, contracting and engineering consulting. Building and construction generates sizeable economic activity in Hong Kong as it contributed 2.9 per cent to GDP in 2005 and the industry’s employees accounted for over 230,000 of the labour force in 2007.
There was a slight increase in the value of construction in 2007 which reached HK$22.4 billion in the first quarter of 2007. This was an increase of 1.8 per cent year-on-year. The increase was due to increased private sector demand, as the gross construction work for the public sector declined from 43.7 per cent in 2006 to 38.7 per cent of total construction demand in 2007.
The housing sector has seen a shrinking market and it was estimated by industry sources that the market is likely to continue to decline. Completions of private residential units dropped from 26,000 in 2004 to 17,300 in 2005. In the public housing front it is forecasted that future trends will be in concurrence with the past figures. It is estimated that in the year 2007-08 public housing completions will be 19,600 units and will drop to 19,000 units by 2010-11.
Variety of building and construction services
This sector is defined by three categories of construction activities:
- Building (residential, commercial and industrial/storage services)
- Structure and facilities (transport, other utilities and plant, environment and sports and recreation
- Non-site activities (decoration, maintenance and repair)
In the first quarter of 2007 the gross value of construction works on-site totaled HK$11.1 billion, declining 3.5 per cent year-on-year. This comprised of HK$4.3 billion from the public sector down 8.3 per cent year-on-year. The rest was made up of the private sector with HK$6.8 billion, up 12.6 per cent year-on-year.
The gross value of related activities of non-site construction amounted to HK$11.2 billion in the first quarter of 2007, experiencing an increase of 0.1 per cent year-on-year. Related construction trades excluding carpentry, electrical and mechanical fitting, plumbing and gas work increased by six per cent year-on-year with the total valued at HK$8.7 billion.
Service providers
The industry is dominated by a small number of domestic contractors that are large in size. However there is also a diverse mix of foreign contractors, a considerable amount of companies that are involved in both subcontracting and developing, in addition to high numbers of subcontractors.
There are a substantial number of large companies that that are able to meet the needs of complex projects that require sophisticated technology and strong financial backing. These companies are usually in their internationalisation process, expanding across regional markets. These large companies are often the main contractors, who then in turn subcontract to smaller companies. The majority of companies in this industry are generally small, in which 90 per cent gross value construction work was less then HK$10 million in 2005.
The industry involves many professional service providers such as architects, surveyors and engineers that are experienced and highly skilled in building works. This is in orderto meet the nature of the construction projects in demand. Due to the complexity and size of these projects, they tend to be awarded as a single package to multi-disciplinary contractors.
It is a non-discriminative industry environment between local and foreign contactors and there are no formal restrictions to entry in both the private and public sector. However, in order to tender to the public sector foreign contractors must have a reputable track record and sufficient financial capability.
Opportunities
There has been a contraction in the level of construction activity in Hong Kong in recent years. This is predominately attributed to the private housing sector, which dropped from 35,300 in 1998 to 15,000 in 2005, while commercial building and public infrastructure activity has remained steady.
The Hong Kong government announced in the 2007/08 budget that it plans to spend HK$29 billion annually over the next few years on public infrastructure projects. These include the Central-Wanchai Bypass (HK$25.2 billion), Wanchai Development Phase II (HK$12.5 billion) and Kai Tak Development (HK$9.8 billion).
In addition there have also been a number of construction projects that have commenced they include Tamar Development Project, Stage 2 Rehabilitation Program for Water Mains and drainage networks in various areas. It is expected that these projects will create up to 23,000 jobs. Hence this provides numerous opportunities for businesses involved in architecture and construction engineering.
In February 2001, a Practice Note entitled 'Green and Innovative Building' was issued, which outlined government incentives for environment-friendly buildings. The development of intelligent buildings provides opportunities for Hong Kong’s builders to utilise advanced technologies in construction.
The best opportunities exist in the supply of building materials and equipment, and providing specialised construction and building services. Areas where Australia has particular capability and suitability for the Hong Kong building and construction sector are listed below.
Building and construction services:
- Architectural services
- Landscape architect
- Contractors
- Civil engineering
Building materials and products:
- Building and formwork systems
- Medium density fibreboard
- Paints and coating
- Fire protection products
- Steel and aluminium products
- Intelligent building systems
- Plasterboard and insulated panels
- High-end sanitary ware
- Up market kitchen cabinets
- Interior fit out products
- Good quality ceramic sinks and baths
- Electrical installation equipment and accessories
- Lighting equipment and installation
- Professional entertainment event and venue technology
- Marble, sandstone and limestone
Green building services:
- Architectural design services
- Environmental engineering services
- Indoor air quality assessment
- Building efficiency assessment
Green building products:
- Building materials with low VOC emissions
- Furnishings
- Renewable energy technologies
- Recycled building products
- Energy and water efficiency and management technologies
- Monitoring systems
Competitive environment
As an open market and because of Hong Kong's access to the Chinese market, competition in the building and construction sector is keen, but not forbidding. It is highly competitive with equipment and materials available from Europe, USA and Asia.
Similar time zones and its close geographic location enhance Australian companies' ability to supply products and services more easily and speedily than other overseas counterparts.
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