Asia Pacific
Labour availability poses challenge to growth
Australia
The Australian construction sector can expect slow growth over the coming year. Ongoing uncertainty over interest rates, global supply chain security and labour shortages will limit private investment. Meanwhile delays due to elections and changes to funding will restrict public sector investment, although this may pick up after the federal elections which must take place in the first half of the year. Growth in construction will primarily be driven by rising demand for and investment in residential housing, healthcare, care facilities, high-tech and data centres.
Labour shortages are going to be the biggest factor pushing up construction costs in Australia in 2025. We expect cost increases of around 5-6%, especially in sectors that are in high demand. Queensland will likely experience significant cost pressures where preparations are underway for Brisbane to host the 2032 Olympic games.
China
Construction in China is expected to continue to slow. Economic growth is decelerating, investment is declining, and the real estate market is saturated. Despite this, we estimate economic growth will sit at around 3-4%. Construction costs are likely to remain steady.
The tech sector is expected to see the bulk of growth, focused on construction of data centres, chip manufacturing and drone technology. Any cost escalations will also be focused on these areas. The cost of data centre projects has risen significantly as demand has skyrocketed on the back of the AI boom, leading to shortages of key equipment, such as generators. Data centre construction costs have increased 20% over the last two years.
Labour shortages, compounded by the national policy requiring older workers to retire from the construction industry will continue to cause the industry headaches in 2025. Geopolitical tensions and protectionist trade policies will also continue to bite, contributing to the sluggishness of the real estate market.
Hong Kong
Overall, we expect a slowdown in construction, due to the lack of foreign investment, ongoing economic instability and the rollback of government funding necessitated by a large government deficit which means many projects have been cancelled or deferred. Public housing projects are the single exception, due to significant government investment over the next five years. We anticipate economic growth to be moderate but steady at 2.4-2.8%, buoyed by the ongoing recovery in the retail and tourism sector.
The greatest challenge for Hong Kong’s construction sector will be availability of skilled labour, which also continues to put pressure on prices. Like many other countries in the region, workers are often sourced abroad, but companies will need to pay attention to what they can offer to retain staff and keep projects on schedule. Slight cost increases of 0-1% may be expected.
According to the recent Hong Kong 2024 Policy Address, the government will focus on economic development, consolidating and enhancing Hong Kong's traditional industries on the one hand while actively exploring new growth areas. This will eventually provide a much-needed boost to the construction industry. However, it may take some time for the injection of government funds to translate into economic stability and growth.
India
Construction activity in India is likely to increase, along with economic growth rates of 6.7%.⁴ Government policies promoting investment will boost key sectors such as semiconductor and chip manufacturing, and industrial infrastructure development. Meanwhile the increase in per capita income and ongoing migration to urban centres will continue to fuel demand for residential construction.
We expect costs to rise by around 5-7% in India, however there is some uncertainty over the potential impact of changing government policy and taxation on costs. The greatest challenges for the Indian construction industry are likely to be skilled labour shortages and potential supply chain disruptions, which in turn will push up costs.
Japan
Construction activity is stabilising, supported by ongoing large-scale projects and steady economic growth. Similarly, construction costs are likely to remain broadly constant over the coming year, or slightly decrease by around -0.5%. Japan can expect to see growth in hospitality following the increase in tourism and weak Yen. High-tech, particularly data centre and semiconductor manufacturing facilities will grow as demand increases due to the growth of AI and government subsidies boost investment.
The construction market will remain busy, meaning many contractors’ order books are now full for the next year (or two). Sub-contractors, particularly those skilled in MEP, are proving hard to find, making it difficult to increase capacity. It’s important to find and appoint contractors early in the process. The lack of competition might lead to higher construction costs.
Although costs are now stabilising, prices are considerably higher than they were pre-pandemic when many budgets were set. Skilled labour shortages and the impact of the weak Yen on the relative cost of imported goods such as oil and gas mean prices are unlikely to come down in the near future.
Malaysia
Malaysia's construction costs are expected to continue to rise by around 3-5%. Key material prices like steel remain subject to strong demand amid rising raw material costs and growing demand for infrastructure projects. Meanwhile skilled labour shortages are driving up wages, especially for specialised trades.
Despite these challenges, Malaysia's ongoing growth will provide opportunity for private investments in key sectors such as data centres, pharmaceuticals, and high-tech manufacturing. Sustainability initiatives and the rising adoption of green building materials are reshaping construction trends, particularly in urban hubs like Johor, Selangor, and Penang, though these may add cost premiums in the short term.
Singapore
We can expect stable demand for construction in Singapore, with public sector projects driving growth. Logistics, high-tech, advanced manufacturing, and green economy sectors are expected to see the greatest opportunities for growth as Singapore aims to solidify its position as a digital innovation hub. Healthcare and elder care will also see significant investment as an ageing population continues to drive increased demand.
Singapore faces significant labour shortages. Heavy reliance on migrant workers, combined with the ageing domestic population, leaves the country vulnerable to shortages, particularly of skilled workers. While we expect cost rises of up to 3%, labour shortages may also cause project delays. The lack of skilled professionals might mean firms are reluctant to invest in advanced technologies and innovative construction methods.
Taiwan
International investment in Taiwan will boost construction activity as foreign companies seek to build R&D facilities, data centres and hotels in the country. Economic growth is projected to be around 3.2%.⁵ The high-tech sector will benefit from much of the growth in Taiwan in 2025, as demand for AI, 5G and high performance computing continues to grow.
Labour shortages are pushing up wages, and this is the main reason we're likely to see construction costs in Taiwan increase by around 2%. Taiwan’s push towards a more environmentally sustainable future will bring opportunities and challenges. Investment may be directed towards projects with green credentials; however, a new carbon fee system is likely to negatively impact larger, high emission projects.
Thailand
Thailand can expect moderate economic growth in 2025, fuelled by robust private consumption, exports, investments and a thriving tourism industry. Thailand’s data centre sector will see very significant growth, possibly up to 30%.
We don’t expect major cost increases (0-1%), although projects needing lots of imported materials are at greater risk of fluctuating costs.
An acute shortage of skilled labour will prove the most significant challenge for construction in 2025 and will contribute to cost increases where they exist. An ageing population, lack of adequate skills training, and the brain drain as many workers head overseas are all contributing factors.
