A sign of trouble

PROPERTY: Skyscrapers are often seen as symbols of a nation’s power and wealth. But according to a recent report, countries that aim to build more and taller skyscrapers are heading for economic disaster.

Barclays Capital looked at the connection between the skyscraper building boom and the economic health of countries over the past 140 years. They came to the sobering conclusion that passion for tall buildings is quickly followed by a financial crash. For example, New York’s Bank of Manhattan and Chrysler Building, followed a year later by the Empire State Building, were completed as the Great Depression was beginning.

More recent examples include Dubai, which finished construction on the tallest building in the world, Burj Khalifa, in 2009, as well as a towering collection of offices, apartments and hotels. Within a year, the country needed a bailout from Abu Dhabi to avoid bankruptcy.

The Barclays Capital report said, “Thankfully for the world economy, there is not currently a skyscraper under construction that is planned to overtake the height of the Burj Khalifa.” At the moment, India is building what will be the world's second-tallest skyscraper, the India Tower, in Mumbai.

Within a year of finishing Burj Khalifa, the world's tallest building, Dubai needed a bailout.

The biggest worry is China, says the report. More than half of the world's skyscrapers under construction are in that country. When tall buildings in planning are counted, this increases to 87 per cent. “Building booms are a sign of excess credit,” Andrew Lawrence, director of property research at Barclays Capital in Hong Kong, told The Guardian.

Lawrence adds that historically, in addition to easy credit, rising property prices and profit expectations lead nations to build lots of skyscrapers. A property bubble is then followed by a dramatic price drop and even recession.