Skip to main content

Pride precedes a fall: do skyscrapers predict a financial downfall?


A study by investment bank, Barclays Capital, says that the construction of high rise buildings and skyscrapers are indicators of an imminent economic downfall.

The BarCap report provides a number of examples. These include the construction boom that led to the erection of the skyscrapers of the Chrysler and Empire State Building in New York which preceded the city’s 1929 stock market crash and the Great Depression. In addition, the building boom to erect taller and taller constructions in Dubai, such as the Burj Khalifa – the world’s tallest building - preceded the 2010 financial crisis. So, the report concludes that when there is a period in which countries strife to build the tallest construction, soon afterwards the country is hit by financial woes. The correlation between high rise construction and economic crash should heed as a warning to countries.

The BarCap warned that China, which is currently undergoing construction of half the world’s highest buildings, will soon be headed for an unhealthy economic situation. Similarly, in India, which has just built two skyscrapers, is also on Barclays’ radar, especially since 14 more high-rise buildings are planned. High buildings lead to bad karma, says Barclays Capital.

The report reveals that building booms are signs of excess credit resulting in bursts of sporadic but intense construction activity, rising land prices, and excessive optimism. However, the report says that by the time the buildings are finished, the economy of the country is already sliding into recession. And currently, China and India are showing signs of fulfilling the prophecy. The report labels China has potentially the world’s “biggest bubble builder” because it is the location of 53% of the 124 skyscrapers under construction globally.

The BarCap report says China is already “wobbling.” Evidence of this, the report says, is that the number of residential property sales has decreased by 40-50% in Beijing and Shanghai and developers have slashed prices by 5-20%.

India, soon to have the second tallest building in the world, the Tower of India in Mumbia, and 14 more skyscrapers on the way, already has non-performing loans which have grown by nearly 33% in the past six months.

The BarCap reports says that, if history repeats, the building boom in China and India is a reflection of a misallocation of capital which may result in an economic correction in the next five years.

People predicted the global economic crisis. A branch of economics founded by followers of Henry George (an American economist) has charted property collapses over the past 100 years and found that booms create the condition for a bust around every 18 years. Fred Harrison in The Chaos Makers (1997) wrote: “by 2007 Britain, and most of the other industrially advanced economies, will be in the throes of frenzied activity in the land market. Land prices will be near their 18-year peak on the verge of the collapse that will presage the global depression of 2010.”

Comments

Popular posts from this blog

Pir-E-Kamil - The Perfect Mentor by Umera Ahmed: book review

The Perfect Mentor pbuh  (2011) is set in Lahore and Islamabad in Pakistan. The novel commences with Imama Mubeen in medical university. She wants to be an eye specialist. Her parents have arranged for her to marry her first cousin Asjad. Salar Sikander, her neighbour, is 18 years old with an IQ of 150+ and a photographic memory. He has long hair tied in a ponytail. He imbibes alcohol, treats women disrespectfully and is generally a “weird chap” and a rude, belligerent teenager. In the past three years he has tried to commit suicide three times. He tries again. Imama and her brother, Waseem, answer the servant’s call to help Salar. They stop the bleeding from his wrist and save his life. Imama and Asjad have been engaged for three years, because she wants to finish her studies first. Imama is really delaying her marriage to Asjad because she loves Jalal Ansar. She proposes to him and he says yes. But he knows his parents won’t agree, nor will Imama’s parents. That

Flaws in the Glass, a self-portrait by Patrick White: book review

The manuscript, Flaws in the Glass (1981), is Patrick Victor Martindale White’s autobiography. White, born in 1912 in England, migrated to Sydney, Australia, when he was six months old. For three years, at the age of 20, he studied French and German literature at King’s College at the University of Cambridge in England. Throughout his life, he published 12 novels. In 1957 he won the inaugural Miles Franklin Literary Award for Voss, published in 1956. In 1961, Riders in the Chariot became a best-seller, winning the Miles Franklin Literary Award. In 1973, he was the first Australian author to be awarded the Nobel Prize for Literature for The Eye of the Storm, despite many critics describing his works as ‘un-Australian’ and himself as ‘Australia’s most unreadable novelist.’ In 1979, The Twyborn Affair was short-listed for the Booker Prize, but he withdrew it from the competition to give younger writers the opportunity to win the award. His autobiography, Flaws in the Glass

Sister cities discussed: Canberra and Islamabad

Two months ago, in March 2015, Australia and Pakistan agreed to explore ways to deepen ties. The relationship between Australia and Pakistan has been strong for decades, and the two countries continue to keep dialogues open. The annual bilateral discussions were held in Australia in March to continue engagements on a wide range of matters of mutual interest. The Pakistan delegation discussed points of interest will include sports, agriculture, economic growth, trade, border protection, business, and education. The possible twinning of the cities of Canberra, the capital of Australia, and Islamabad, the capital of Pakistan, were also on the agenda (i.e. called twin towns or sister cities). Sister City relationships are twinning arrangements that build friendships as well as government, business, culture, and community linkages. Canberra currently has international Sister City relationships with Beijing in China and Nara in Japan. One example of existing