So says the BBC. On various continents, and going back for over a century, the construction of new record-nearing skyscrapers seems to be a consistent canary in a coal mine indicating that an economic bubble exists and a financial crash will soon occur in a given society:
There is an “unhealthy correlation” between the building of skyscrapers and subsequent financial crashes, according to Barclays Capital.
Examples include the Empire State building, built as the Great Depression was under way, and the current world’s tallest, the Burj Khalifa, built just before Dubai almost went bust. China is currently the biggest builder of skyscrapers, the bank said. India also has 14 skyscrapers under construction.
“Often the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction,” Barclays Capital analysts said.
The bank noted that the world’s first skyscraper, the Equitable Life building in New York, was completed in 1873 and coincided with a five-year recession. It was demolished in 1912.
Other examples include Chicago’s Willis Tower (which was formerly known as the Sears Tower) in 1974, just as there was an oil shock and the US dollar’s peg to gold was abandoned. And Malaysia’s Petronas Towers in 1997, which coincided with the Asian financial crisis. The findings might be a concern for Londoners, who are currently seeing the construction of what will be Western Europe’s tallest building, the Shard.
Investors should be most concerned about China, which is currently building 53% of all the tall buildings in the world, the bank said.
A lending boom following the global financial crisis in 2008 pushed prices higher in the world’s second largest economy.
In a separate report, JPMorgan Chase said that the Chinese property market could drop by as much as 20% in value in the country’s major cities within the next 12 to 18 months.
In India, billionaire Mukesh Ambani built his own skyscraper in Mumbai – a 27-storey residence believed to be the world’s most expensive home.