Will high-rise boom spell another downturn? [Feb 2012]

Globally, in the history of construction, building skyscrapers have always led to major economic turmoil
The higher you go, the easier the fall is the outcome of a recent research that reveals a startling connection between economic slowdown and skyscraper construction.
Though it might sound purely co-incidental, the research conducted by Barclays Capital states some astounding figures that links the two. Going by the details mentioned in the report, two of Asia’s biggest economies India and China are fast approaching another global financial meltdown thanks to the immense explosion in skyscraper construction.
The report clearly indicates China as the biggest bubble builder and is home to half of the world’s existing buildings higher than 240 metres, the average height for skyscrapers. But there’s no stopping it. All set to double the current tall buildings, it will add another 66 in the upcoming six year period.
Talking about India which is known as the second largest populated country has just two skyscrapers at present. However the scenario is all set for a drastic change with 14 more all set to stand tall around the country. This includes The Tower of India, the world’s future second tallest skyscraper.
The report is the brainchild of Andrew Lawrence, Director of Property Research at Barclays Capital, Hong Kong. According to him, “Skyscraper construction is characterised by bursts of intense activity with easy credit, rising land prices and excessive optimism. But by the time these skyscrapers are finished, the economy has slipped into recession”.
With both the countries looking upwards over the next few years, the historical cycle suggests that the crash of these two countries economy is set to be anywhere around the end of this decade.
A glimpse at the past shows the first skyscraper completed in 1873 coincided with a 5 year long recession in US and Europe called now as the Long Depression. Some of the other examples are The Auditorium Building in Chicago completed in 1889 and the New York World Building, New York, completed in 1890, coincided with the British banking crisis of 1890 and a world recession. The Masonic Temple in Chicago, completed in 1892, The Manhattan Life Insurance Building in 1894 and Milwaukee City Hall, completed in 1895, all coincided with the US panic of 1893 marked by the collapse of railroad overbuilding, a series of bank failures and a run on gold. Until the Great Depression of the 1930s this was considered the worst depression the United States had ever experienced.   
Not so long ago, The Burj Khalifa, completed in 2010 which is till date the tallest skyscraper coincided with Dubai going almost kaput costing the developer a fortune, giving  away another global financial crisis. The entire world is still crawling to cope with it.
If history repeats itself, the construction boom in India and China could be a plain evidence of misallocation of funds resulting in another major meltdown in the offing.
Facts & Figures

China to complete 53 per cent of the 124 skyscrapers under construction over the next six years
87 per cent increase in the number of skyscrapers in Chinese cities
China has 75 completed skyscrapers above 240 m in height
Over 50 per cent of China’s skyscrapers are today in tier 1 cities, and about 80 per cent of its new skyscrapers will be built in tier 2 and 3 cities
India has only two of the world’s 276 skyscrapers over 240m in height
India to complete 14 new skyscrapers in next 5 years
India is constructing the second tallest building in the world, the Tower of India, which should complete by 2016

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