There is an “unhealthy correlation” between the building of skyscrapers and impending financial crashes, according to analysts at Barclays.
The world’s first skyscraper, the Equitable Life building in New York, was completed in 1873 and coincided with a five- year recession. The pattern continues throughout history. The Empire State Building coincided with the Great Depression, Chicago’s Willis Tower (formerly Sears Tower) built in 1974, just as there was an oil shock and the US dollar’s peg to gold was abandoned, Malaysia’s Petronas Towers built in 1997, at the same time as the Asian financial crisis and the world’s tallest, the Burj Khalifa, built just before Dubai almost went bust.
China is currently the biggest builder of skyscrapers accounting for 53 per cent of those now under construction. India has 14 skyscrapers under construction. Britain is constructing the tallest building in Western Europe, the Shard in London.
In a separate report, JPMorgan Chase said that the Chinese property market could drop by as much as 20 per cent in value in the countrys major cities within the next 12 to 18 months. A lending boom after the financial crisis of 2008 pushed prices higher in the Chinese market.
Analysts at Barclay’s Capital, which has published the skyscraper index every year since 1999, are saying investors should be concerned about China and India.
Often the worlds tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction. Investors should therefore pay particular attention to China and India’ Barclay’s Capital analysts said.