Skyscraper Index: The Higher You Build, The Harder You Fall

By: EW News Desk Team   Date: 12 January 2012

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EW News Desk Team

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12 January 2012

China and India could be the next economies bound for an imminent crash, claimed a report by Barclays Capital Research on Wednesday – whose annual Skyscraper Index survey cite an “unhealthy correlation” between the construction of skyscrapers and economic slowdowns.

Historically, the construction of the world’s tallest buildings has always been followed by some form of economic crisis, noted the report; and with both China and India presently experiencing a “skyscraper boom”, there is a growing concern that both economies could suffer a similar fate to its predecessors.

Related: China vs. India – Is Either Economy At Risk? : Stephen Roach

Notable precedents to this claim include the completion of the Equitable Life Building in 1873, which coincided with the Long Depression from 1873-1878; the construction of three record breaking buildings in the United States – 40 Wall Street (1929), the Chrysler Building (1930), and the Empire State Building (1931) – that were completed just as The Great Depression from 1929-1933 went into full swing; the unveiling of the Petronas Twin Towers in Malaysia in 1997, which was soon accompanied by the Asian Financial Crisis; and more recently, the erection of the world’s highest building the Burj Khalifa in Dubai, which heralded the start of an economic downturn in the country.

"Often the world's tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction,” claimed Barclays Capital in its report, as cited by AFP.

"Investors should therefore pay particular attention to China, today's biggest builder... and India, which with just two completed skyscrapers, now has 14 skyscrapers under construction."

China, the report noted, could already be demonstrating signs of fulfilling the prophecy, with its largest quarterly business survey showing that confidence among property developers had collapsed to a point where it was worse than the lowest point in the 2008 recession.

According to the lead author of the report, China today is the world’s “biggest bubble builder”, considering the fact that it now has 53 percent of the world’s total skyscrapers under construction.

Related: China's Ghost Towns: Overdevelopment in the Real Estate Market

Related: 200 Million Empty Apartments? China's Complex Property Market

Related: China Bust MAY Have Started, As Property Bonds Hit the Skids

The number of residential property sales in Beijing and Shanghai have already decreased by 40-50 percent, while developers have been slashing their prices by 5-20 percent nationwide, claimed Andrew Lawrence, who is also the director of property research at Barclays Capital in Hong Kong.

"China will complete 53 percent of the 124 skyscrapers under construction over the next six years, expanding the number in Chinese cities by a staggering 87 percent,” said Lawrence in his report.

"China's skyscrapers are not only increasing in number -- it now has 75 completed skyscrapers above 240 metres in height -- but the average height of the skyscrapers that it is building is also increasing as past liquidity fuels the construction boom."

India, on the other hand is playing catch-up, though the indicators do not look good.

“Today India has only two of the world's 276 skyscrapers over 240 metres (788 feet) in height, yet over the next five years it intends to complete 14 new skyscrapers, in what will prove to be its largest skyscraper building boom.”

"Worryingly as well, India is also constructing the second tallest building in the world, the Tower of India, which should complete by 2016.”

"The writing, so to speak, would seem to be already on the glass curtain walling. For if history proves to be right, this building boom in China and India could simply be a reflection of a misallocation of capital, which may result in an economic correction for two of Asia's largest economies in the next five years."


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