All responses considered in the Q2 2013 RICS Hong Kong Construction Market Survey show that ultimately, sentiment in the construction industry remains generally positive. While construction activity continues to rise however, there have also been signs of slowing down.
First and foremost, total workloads1 continued to edge up, with the headline net balance2 at +26. The public sector (public housing and public non-housing works) recorded further gains in workloads, although both the net balance readings were less positive than in the Q1 survey. Sentiment in the private sector however ended the quarter on a more mixed note.
Within this segment, the best performing area was housing which recorded a net balance of +86 despite the property tightening measures implemented by the government earlier this year. The commercial category again shows rising workloads, but the pace of increase has slowed. Rises are also reported to have taken place in infrastructure. The industrial sector however appeared notably weaker, with the net balance coming in at -17. The most negative reading in Q2 was for energy, oil & gas where 20% more respondents saw workloads decline than increase.
The outlook for the coming twelve months has strengthened, with workloads, employment, and profit margin expectations climbing more firmly into positive territory this quarter. The average anticipated increase in building output over the next year is being placed by respondents in the range of 7.5 to 10%. Meanwhile, employment and profit margins on average are expected to rise between 5 and 7.5%.
It can be observed in the report that levels of construction activity have remained buoyant. Relative to this, shortages of skilled labour (91%) appeared to be a key issue once again this quarter. Other main factors limiting an uptick in construction activity included financial constraints (90%), planning/regulation (78%) and competition (73%). By way of contrast, only just over one-third of respondents cited insufficient demand as a constraint. Responses to the survey also indicate that skills shortages were visible across all fields. These include quantity surveyors, bricklayers, carpenters, plasterers, plumbers, electricians, and other construction professionals.
Finally, the results show that only 9% of respondents indicated that the use of Building Information Modelling (BIM) increased in Q2. Most areas showed little change compared with the preceding period, although it is significant to note that there was an increase in the use of BIM in cost management.
RICS Senior Economist Andy Wu, said, “Although our survey results show last quarter ended with the construction industry still in a buoyant mood, it would be prudent to view them with an appropriate amount of caution. As there are still persistent challenges such as land acquisition, a rise in input costs, and shortages of skilled workers, we believe these factors could potentially impact on the deliverability of major construction projects going forward. Moreover, sentiment over the coming few quarters is likely to continue to be adversely affected by concerns about unstable external demand and China’s economic difficulties.”
Chairman of RICS Hong Kong, Mr. Kenneth Kwan added, “There must be fluctuation in the construction activity. As long as it is still on the rise, rising moderately may not be a bad thing to the industry and the professionals. We can see China is lowering their target GDP as well for a sustainable healthy growth. The result of the survey did provide a good reference for people to get ready and be prepared for the forever changing environment.”