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New York's Chrysler Building, which was completed just as the Great Depression struck. John Stillwell/PA Archive/Press Association Images

Mind now: China and India warned over skyscraper boom

Skyscrapers may herald financial crises, according to an ongoing study of the construction of tall buildings.

A SKYSCRAPER building boom in China and India may be a sign of an impending economic correction in two of Asia’s largest economies, according to a new report by Barclays Capital.

Barclays has mapped an “unhealthy correlation” between construction of the world’s tallest buildings and impending financial crises over the last 140 years.

Today, China is home to half of the world’s skyscrapers — defined as buildings over 240 metres tall — currently under construction.

India, which has just two skyscrapers, is seeing its first skyscraper building boom, with 14 under construction, including the world’s second-tallest tower, in the financial capital Mumbai.

“Building booms are a sign of excess credit,” Andrew Lawrence, director of property research at Barclays Capital in Hong Kong, said Wednesday.

Bubble barometer?

Historically, skyscraper construction has been characterised by bursts of sporadic, but intense activity that coincide with easy credit, rising land prices and excessive optimism, but often by the time skyscrapers are finished, the economy has slipped into recession, Lawrence said.

The Great Depression hit as the finishing touches were being put on three record-breaking buildings in New York: 40 Wall Street, the Chrysler Building and the Empire State Building, which were all completed between 1929 and 1931, Barclays noted in a 10 January report.

The economic and oil crises of the 1970s coincided with the completion of the twin towers at New York’s World Trade Center, in 1972 and 1973, and Chicago’s Sears Tower in 1974.

The Asian financial crisis hit as Kuala Lumpur’s Petronas Towers were finished in 1997.

Dubai’s $4.1 billion Burj Khalifa, completed in 2010, is now the world’s tallest building. As it was being built, Dubai nearly went bust and the world slid into the Great Recession.

“Thankfully for the world economy, there is not currently a skyscraper under construction that is planned to overtake the height of the Burj Khalifa,” the report said.

However, signs of trouble are escalating in China and India.

Today, China gets the dubious distinction of being the world’s “biggest bubble builder,” as it erects ever more and ever higher towers, Barclays said. Home to 53 per cent of the 124 skyscrapers now under construction globally, China is primed to increase its stock of skyscrapers by 87 per cent.

About 80 per cent of new buildings are going up in tier two and three cities, away from developed coastal areas of the Pearl River Delta and Yangtze River Delta, which Barclays called “evidence of the expanding building bubble.”

Lawrence, who was lead author of the report, said China’s property market is already wobbling.

The number of residential property sales has decreased 40 to 50 per cent in Beijing and Shanghai and developers have slashed prices 5 to 20 per cent, he said.

India, which has just two skyscrapers but is building 14 more, takes top honors for hubris: The second tallest building in the world, the Tower of India, is now under construction in Mumbai.

Non-performing loans in India — a substantial number of them to real estate ventures — grew by nearly a third in the first half of this fiscal year, more than triple the average annual growth rate since 2006, according to the Reserve Bank of India.

“If history proves to be right, this building boom in India and China 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,” Barclays said.

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16 Comments
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    Mute Billy Big Baws
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    Dec 1st 2020, 12:47 AM

    We’ve just exited a level 5 lockdown and people are being told by the government to…. “stay away from crowded shops”…. obviously shops will be thronged with people now after being cooped up for a month not being able to buy a shirt or a dress or god forbid….a tie…also deemed non essential when I went looking for one in Tesco. That statement is what my late grandfather would call….complete bolloxology.

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    Mute Terry Cahill
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    Dec 1st 2020, 7:54 AM

    @Billy Big Baws: And the first pop up I see on my device as I wake is from RTE about QUEUES forming outside shops this morning , and all this before 7 am.

    39
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    Mute Paul Mc
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    Dec 1st 2020, 12:12 AM

    Maybe I’m wrong but I think putting a senior civil servant out in front of the media and telling us how to behave is bizarre ,what qualifies her to pontificate to the Irish people, has she more qualifications than George Lee by any chance?

    164
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    Mute Donal Desmond
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    Dec 1st 2020, 12:27 AM

    Christ..It will.be like the last helicopter out of Saigon when the shops open .

    85
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    Mute Terry Cahill
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    Dec 1st 2020, 7:58 AM

    @Donal Desmond: Miss Saigon live from Mary Street !

    13
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    Mute Dobby Dooo Dooo
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    Dec 1st 2020, 12:23 AM

    I love how they chose a photo of Penneys for this article. You can guarantee they will have a queue from Mary St to the Spire tomorrow…

    84
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    Mute michael macken
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    Dec 1st 2020, 6:56 AM

    @Dobby Dooo Dooo: i am in the queue already

    25
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    Mute Terry Cahill
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    Dec 1st 2020, 7:56 AM

    @Dobby Dooo Dooo: already a queue before 7 am .

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    Mute Dobby Dooo Dooo
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    Dec 1st 2020, 10:17 AM

    @Terry Cahill: People going in for “essentials” and coming out with bags full of cr@p they don’t need…

    7
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    Mute Kevin O'Brien
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    Dec 1st 2020, 12:37 AM

    How do people stay away from crowded shops, if they are already in a crowded shop :-/

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    Mute Alan McArdle
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    Dec 1st 2020, 4:02 AM

    @Kevin O’Brien: and if we all shopped off-peak…

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    Mute Paul Gorry
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    Dec 1st 2020, 1:40 AM

    Me alarm clock set, mask ready to go, hand sanitizer in me pocket, not taking the bus going to walk it. Penny’s here i come. NOT.

    51
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    Mute deisecelt
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    Dec 1st 2020, 5:08 AM

    @Paul Gorry: as a penneys employee I think your in the minority….unfortunately. they should of sent us for zookeeper training during the lockdown.

    106
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    Mute Marie
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    Dec 1st 2020, 8:46 AM

    @deisecelt: “should of” ?

    13
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    Mute Kevin O'Brien
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    Dec 1st 2020, 12:52 AM

    Reading down through the articles here on the Journal & all I’m seeing is the word “avoid”. Avoid public transport, avoid crowded shops, avoid putting on special offers. Avoid, avoid, avoid.

    46
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    Mute deisecelt
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    Dec 1st 2020, 5:07 AM

    @Kevin O’Brien: in other words avoid picking up the contagious virus and passing it on to others.

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    Mute James Keane
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    Dec 1st 2020, 7:11 AM

    The shops are now open to help the economy back on it’s feet and keep people in jobs.
    Also don’t go to the shops.

    45
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    Mute Paul Gorry
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    Dec 1st 2020, 1:26 AM

    Is this the same headline i read last March, without the Christmas bit?

    34
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    Mute Seeking Truth
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    Dec 1st 2020, 8:04 AM

    @Paul Gorry: Reduce reuse recycle….

    8
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    Mute Thomas Quinn
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    Dec 1st 2020, 8:47 AM

    Consume! Consume! Consume! Retail shopping slaves to the system of controlling your life. Stress over getting stuff and overstretch those cards…… Sad really. I hope everyone eventually wakes up and stops the unnecessary stresses around this time of year. Remember all those toys that will be gathering dust in a month or 2 and all that food that goes to waste cost hours of your life to pay for. Right now off to ques outside Smyths…… Lol

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    Mute Ed
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    Dec 1st 2020, 7:35 AM

    People are already queueing so best of luck with that advice.

    15
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    Mute Fiona Fitzgerald
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    Dec 1st 2020, 4:01 PM

    @Ed: Hope they’re doing what most people are doing and queuing 2 m apart, outdoors.

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    Mute michael macken
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    Dec 1st 2020, 7:03 AM

    but the retailers say the complete opposite, pack in and everyone get out and shop till ye drop, who should we listen to. :-)

    13
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    Mute zico
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    Dec 1st 2020, 10:02 AM

    Stay away from crowded shops????its christmas time

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    Mute Tom Bombdadil
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    Dec 1st 2020, 6:46 AM

    Ya, but you see “Christmas” you cannot avoid these things. The air must be thin up there.

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    Mute Seeking Truth
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    Dec 1st 2020, 8:05 AM

    I will wait a few days and then stroll the shops at my own leisure. I got 95pct of my Christmas shopping done online and feel good about not being frantic this month. I did miss the in-person Black Friday sales this year, to be honest.

    7
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