Skyscrapers Curse: Japan's Depression is Far From Over

According to the Skyscrapers Curse, Japan might not be even close to the end of the 2 decade long depression, as they have just built the tallest tower in the world in Tokyo:

World’s Tallest Tower to Help Tokyo Railway Lure Shoppers
(Bloomberg) May 18, 2012 — The Tokyo Skytree, twice as tall as the Eiffel Tower, opens next week as Japanese train operators counter an aging population by building malls, offices and tourist attractions. 

The 634-meter (2,080 feet) structure in eastern Tokyo sits in a retail complex housing more than 300 shops and restaurants, a planetarium and an aquarium. Developer Tobu Railway Co. (9001) expects the project to draw 32 million visitors in its first year, surpassing the numbers at Tokyo Disney Resort. Tobu, whose revenue has fallen for five years, will also get a 28.3 billion yen ($352 million) sales boost in the year ending March 31, according to Kazuhiko Hirata, a general manager for finance.

Here's a short description of the Skyscrapers Curse:

there’s an uncanny, if unscientific, correlation between financial crises and efforts to build the world’s tallest building. Look no further than Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel.
The human propensity for architectural overreach has been a surprisingly reliable omen. It’s not a stretch to think of such projects as visual punctuation marks. A giant billboard made of steel, glass, concrete and money. A common thread between skyscrapers and economic disasters has to be easy credit, which fuels irrational growth, valuations, and hubris.

My other posts about the Skyscrapers Curse.

Here are a few pictures of the tower:

Skyscrapers Curse — Continued

If you don't know about the Skyscrapers Curse, please read the previous posts I've written on the topic. Beyond that, I don't much more to add than the fact China and world are set for a major economic collapse of historical proportions.

Let's start with China:

Feb. 28 (Bloomberg) -- Shanghai Greenland Group said it may add more floors to China’s second-tallest building under construction to turn it into the highest in the world after the Burj Khalifa in Dubai. 

The closely held company set up in 1992 may increase the height of Greenland Center in the central city of Wuhan to 636 meters (2,086-foot) from 606 meters, said Wang Xiaodong, Greenland’s Shanghai-based spokesman. That will exceed the 632- meter Shanghai Tower also scheduled to be completed in 2014. 

China is home to 53 percent of all skyscrapers being built around the world, up from 44 percent a year earlier, Barclays Capital Research said. The country will increase the number of skyscrapers to 141, from the current 75, by 2017, according to the bank’s annual Skyscraper Index report in January. 

“The local government in Wuhan actually has a stronger intention to revise the plan, but it’s not easy for a skyscraper like this,” Wang said in a phone interview today, adding that the plan may be finalized by the end of the year. 

The Greenland Center broke ground on the project in December 2010 with a planned investment of 30 billion yuan ($4.8 billion). The development will include luxury hotels, apartments, and a conference center, it said. The building is on track to be completed in two years, Wang said, declining to say how much costs will be added with any revision to the plans. 

And then Vietnam:

Vietnam’s Skyscraper Keangnam to Drive Hanoi Rents to 5-Year Low
Feb. 28 (Bloomberg) -- Vietnam’s Keangnam Hanoi Landmark Tower, the tallest in Southeast Asia after Petronas Towers, is boosting prime office space in the capital Hanoi by half and threatening to drive rents to a five-year low. 

The property, which includes a hotel, luxury apartments and mall, is adding 100,000 square meters (1.1 million square feet) of office space, said Choi Yong-Ho, marketing manager of Keangnam Vina, the unit of South Korea’s Keangnam Enterprises Ltd. that built the 346 meters (1,135 feet) tower. 

[...]“The tower flooded the market with a lot of supply,” Fraser Wilson, Ho Chi Minh City-based director of Vietnam Property Fund at Dragon Capital, the biggest private investor in Vietnam’s stock market, said in an interview on Feb. 24. “That can only have a negative impact on the rents.” 

[...] The tower has the same height as the Center in Hong Kong and is higher than Shanghai’s Shimao International Plaza and John Hancock Center in Chicago, according to Council on Tall Buildings and Urban Habitat’s data. 

India's Skyscraper Boom Matchs China’s

We have been talking about the Skyscrapers Curve for 3 years now — see previous posts.

It's interesting to see it evolve, and see how the current credit bubble is global and how much the downturn will be painful due to the fact that these excesses are not only extreme, but are also worldwide.

The report mentions a Skyscraper Index Report from Barclays. I'd be curious to have a look at it. Wouldn't mind if one of you, dear readers, could forward that to me :-)

Here's the case of India. Bloomberg reports:

(Bloomberg) — 2012-01-12 — India, which is building the world’s second-tallest skyscraper, is catching up with China in an office building boom that may indicate that an economic slowdown is imminent, according to Barclays Capital Research.

India is scheduled to complete 14 new skyscrapers taller than 240 meters (787 feet) over the next five years from the current two, Barclays’s analysts led by Andrew Lawrence said in a report yesterday. China will increase the number of skyscrapers to 141, from the current 75, by 2017, according to the bank’s annual Skyscraper Index report.

Over the past 140 years, completion of the tallest buildings has coincided with periods of economic turmoil such as the Great Depression, the Asian financial contagion and the global credit crisis, Barclays said. China is home to 53 percent of all skyscrapers being built around the world, up from 44 percent a year earlier, according to Barclays.

“India, it seems, is playing catch-up,” the Barclays analysts, based in Hong Kong, wrote. “If history proves to be right, this building boom in China and India could simply be a reflection of a misallocation of capital, which may result in an economic correction in the next five years.”

The 720-meter India Tower will be the world’s second- tallest skyscraper when work on the building finishes, overtaking the 632-meter Shanghai Tower that is scheduled for completion in 2014, according to the Council on Tall Buildings and Urban Habitat. Dubai’s 828-meter Burj Khalifa is the world’s tallest building. 

[...] More than half of China’s skyscrapers will be built inland and away from the wealthier coastal areas and Pearl River Delta region by 2017, indicating a move toward second-tier and third- tier cities, according to the Barclays report.

China’s home prices fell for a fourth month in December after the government reiterated plans to maintain curbs that include higher down-payment and mortgage requirements, according to SouFun Holdings Ltd. Housing values dropped in 60 out of 100 cities tracked by the nation’s biggest real-estate website owner, including the 10 largest cities such as Shanghai and Beijing.

The government said last month at an annual economic planning meeting that it won’t back away from real-estate industry curbs this year that are damping home sales and pulling down prices. The nation’s financial center of Shanghai and some other Chinese cities have also said they will continue to impose the home purchase restrictions this year.

The Skyscrapers Curse Should be Complete Now — Saudi's To Build a 1,000m Skyscraper

I have been posting regularly about the Skyscrapers Curse which I find is a very valid and interesting metric of the social mood and irrational exuberance of the crowd over the past century.

So what does the Skyscrapers Curse tells us about the economy when you see all the various "new riches" compete to build the tallest ever building? In remote place away from megalopolises? Hundreds of skyscrapers are being built in Asia and the Middle East, but certainly those in the Middle East are the more worrisome as it doesn't reflect any need due to population density for example.

A few weeks after Koweit, here comes Saudi Arabia who just announced they will build the tallest building in the world, reaching 1,000 m high.

I do not expect any other skyscraper trying to beat this one for this inflation/deflation cycle... Meaning that we have already probably reached peaked exuberance for this generation, and probably the next one (people from 15 to 50 years old today).

1,000 meters, or 3,280 feet. That’s two-thirds of a mile.

When the Kingdom Tower is built on the outskirts of Jeddah, Saudi Arabia it will not only become the tallest building in the world, it will shatter the old record. The current record-holder, Dubai’s Burj Khalifa, stands at 828 meters. At least 173 meters (568 feet) taller, sight-seers on the tower’s observation deck could see how long it takes for their spit to hit the top of Burj Khalifa (this is, if they weren’t hundreds of miles apart). The tallest building in the US, Chicago’s Willis Tower, is 442 meters tall, or 527 meters if you count the antenna. The One World Trade Center tower currently being built in New York will climb, including antenna, to 541 meters.

Not merely a mine-is-bigger-than-yours jibe to their neighbors, the tower is a part of an economic initiative to strengthen Saudi Arabia’s economy by diversifying away from crude oil. For those with the means, the Kingdom Tower will be the poshest of the posh. It features a Four Seasons hotel, Four Seasons serviced apartments, luxury condominiums, top class office space and the world’s highest observatory. Total construction area is 530,000 square meters (5.7 million square feet). Adrian Smith + Gordon Gill Architecture, a Chicago-based architecture firm, won the contract for the Kingdom Tower earlier this week. Smith already has experience with designing tallest buildings in the world. He designed Burj Khalifa while at another architecture firm. The final details of Kingdom Tower’s design are yet to be worked out, but construction is to begin immediately. The total cost for the tower is approximately $1.2 billion.

Now that’s some prime real estate.

ElliottWave, the Skyscrapers Curse and China

I have been posting regularly about the Skyscrapers Curse which I find is a very valid and interesting metric of the social mood and irrational exuberance of the crowd over the past century.

In this month's ElliottWave's Financial Forecast, Steve Hochberg and Peter Kendall provide a similar analysis:

It takes a large surge in positive social mood to motivate people to erect the world’s tallest buildings. When the cooperative efforts of builders, business and government manage to literally push to the sky with the construction of a record-tall building, social mood is almost certainly at high tide. This tendency is tightly grafted to bull markets in stocks, back through at least the late 1920s, when the construction of the Empire State Building topped off the Roaring Twenties. At the outset of the more recent mania era, EWI made the connection between the epic rise in stocks and a burgeoning wave of skyscraper development, which continues to play out. In September 1996, for instance, EWT noted that expanding efforts to build the world’s tallest building are “assertions of power” and signs “of an arrivest culture.” EWT added that these buildings are often finished “after the bear market has begun.” The chart on page 249 of The Mania Chronicles shows that this is exactly how the great peak panned out. Kuala Lumpur’s Petronas Towers claimed the world’s tallest title in 1996, followed by Taiwan’s Taipe 101 and Dubai’s Burj Dubai, now known as the Burj Khalifa (after the Dubai development authority had to be bailed out). In each case, the plans for the buildings were announced as the stock market for each respective country raced toward all-time highs, and each building was completed during subsequent bear markets that are still in place.

The greatest skyscraper boom, however, belongs to China. The current tallest building in China, Shanghai World Financial Center, reached its full height in September 2007, a month before the Shanghai Composite’s peak. This is another stock market high that remains intact. Incredibly, the peaking positive mood motivated construction of the Shanghai Tower, which will become China’s tallest building at 2,074 feet high. It was started as the Shanghai Composite rallied sharply toward a countertrend high in August 2009. It will be just 700 feet short of the Burj Khalifa, still the world’s tallest skyscraper. But what the Chinese skyscraper boom may lack in record heights it makes up for in breadth. China already has six of the 15 tallest buildings in the world. By 2012, 34 of the 100 tallest buildings will be on Chinese soil. Most important, the construction of a new tallest building in China creates a giant non-confirmation with the country’s main stock average, which is still 56% below its 2007 all-time high, as the chart shows. Despite a weak stock market relative to the rest of the world, China’s still-raging skyscraper fever testifies powerfully to the unfettered optimism that surrounds its future. According to the estimate of an Australian trade specialist, for instance, China still needs “50,000 new skyscrapers over the next 15 years to cater to its expanding urbanization.” Yet, according to many other accounts, whole cities of vacant skyscrapers exist. We’ll stick with the perspective offered by the lagging Shanghai stock market, which is clearly unimpressed with all the building. The massive divergence between the Shanghai stock index and the Shanghai building boom suggests that China’s bear market, already four years old, will be one for the ages.

Chinese Bubble, the Skyscraper Curse, Gold and Bubblogy

I have been talking numerous times about the Skyscraper Curse for the past couple of years, and it's interesting to see that this idea is gaining momentum and credibility. Today, Yahoo published a post that deals with China's bubble and the Skyscraper Curve:

In China, five of the world’s ten largest buildings are now under construction. Look out below!, says Vikram Mansharamani, a financial services veteran and part-time academic who has developed a multidisciplinary framework for sniffing out bubbles.v

Mansharamani is author of a new book, BoomBustology: Spotting Financial Bubbles Before they Burst. The book is based in part on a course that Mansharamani, who has two master’s degrees and a Ph.D. from the Massachusetts Institute of Technology, has taught at Yale, his alma mater. [...] Mansharamani has developed a series of lenses through which to examine market behavior. Systematically examining outbursts of mania, from Dutch investors’ infatuation with Tulips in the 1630s to Florida real estate in the 1920, can help sniff out bubbles.

If you look through Mansharamani’s lenses, it’s clear to see there’s a bubble going on in China. Tall buildings aren’t just symbolic of reckless ambition. “Skyscrapers are manifestation of easy money, overconfidence, and hubris,” he says. And they are excellent indicators of a top. “In New York in 1929 there were three buildings competing to be the world’s tallest skyscraper,” he notes. In 1997, the massive Petronas Towers in Malaysia were completed just in time for the Asian financial crisis. The Burj Dubai rose in 2007 to snatch the title of world’s tallest building – just in time for the financial crisis to his the Persian Gulf.

Beyond skyscrapers, Mansharamani notes, “China today exhibits many of the signs that have characterized many of the speculative manias throughout history.” Those include: easy money, overconfidence, and high amounts of leverage. The rise of moral hazard is another indicator. “In China, you have state-owned banks lending to state-owned enterprises to buy land from the state,” he notes. (What could go wrong?) In addition, it’s always a danger sign when economic systems begin to regard what should be outputs as inputs.

Throughout China, provincial officials are obsessed with hitting targets for GDP. Focusing on what should be an end result as an initial goal “leads people to do things that may not make economic sense.” Mansharamani cites as an example a regional leader in China who, desperate to meet a GDP target, blew up a recently constructed bridge. “He got credit for the explosives he bought, and then for the steel and cement he bought and the constructions workers he hired.”

The question for investors during bubbles is how to know when to get out. And that’s one area Mansharamani hasn’t tackled. “I do think timing is a very difficult problem in terms of identifying popping of it,” he said. “I’m not sure it’s worth shorting China at this point in time, but it is definitely prudent to avoid it.” What’s more, he notes, countries and industries throughout the world that depend in large measure on China’s rampant growth are also potentially in danger.

Using Mansharamani’s lenses, one would conclude that the current gold market exhibits plenty of bubblicious signs. He agrees, to a point. A key development in any investment mania is when it crosses over from the province of professionals to a mass phenomenon. That’s happened with gold. “Walking around the city, you see a lot of people advertising that they want to buy gold,” Mansharamani said. “Everyone is talking about gold, and that is a late stage sign.”

Another worrisome sign is the way that an investment boom tends to feed on itself through leverage and financial innovation. Example: housing prices rise because banks lend against housing collateral, and the rising value of the collateral spurs people to borrow more against their homes. A similar dynamic is happening in gold. “The gold market has had tremendous innovation, in the form of exchange traded funds (ETFs), leveraged ETFs, and everything in between,” Mansharamani notes. This innovation has, in turn, affected the price of gold. The advent of gold ETFs, he notes, “has increased the demand for physical gold.”

But there’s one important caveat. Before talking about gold, we should note that “it is an unusual asset at so many levels.” As a sort of “anti-money,” Mansharamani argues, “it is a proxy for lack of trust in responsible monetary policy.” And in recent years, there’s been something of a bubble in that as well.

Academic Research about the Skyscraper Curse

I have already mentioned the Skyscraper Curse about Dubai in early 2009 and London in late 2010 and so I started investigating and looking for more info about this idea as I found it particularly clever and relevant, the most important I will share below with you:

It all got started in Jan 1999 by Andrew Lawrence, a research director at Dresdner Kleinwort Wasserstein who came up with the idea of the Skyscraper Index and its correlation with economic downturns:

The Skyscraper Index is a concept put forward in January 1999 by Andrew Lawrence, research director at Dresdner Kleinwort Wasserstein, which showed that the world's tallest buildings have risen on the eve of economic downturns. Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession. (Skyscraper Index on Wikipedia)

I was amazed and surprised to find that Austrian Economist Mark Thornton has actually been studying the relations between the construction of record setting skyscrapers and economic cycles.

Mark Thornton has published two papers both available on the Mises Institute web site. Here are the links to the first and the second.

Here is the abstract of first paper:

The construction of skyscrapers that qualify as the “World’s Tallest Building” tends to coincide with major downturns in the economy. The Skyscraper Index, created by economist Andrew Lawrence shows a high level of correlation between skyscraper construction and the business cycle. Is this just a coincidence, or perhaps do skyscrapers cause business cycles? A theoretical foundation of “Cantillon Effects” for the skyscraper index is provided here showing how the basic components of skyscraper construction such as technology are related to key theoretical concepts in economics such as the structure of production. The findings, empirical and theoretical, suggest that the business cycle theory of the Austrian school of economics has much to contribute to our understanding of business cycles, particularly severe ones.

For those lazier among us, he has given numerous very interesting presentations about the historical and economics facts that lead to his conclusions. Embedded below is a 30 min must see session, presented at "Our Enemy, Inflation," the Mises Circle in Houstonon Saturday, 24 January 2009.

Below are a few more useful YouTube links, and I am not embedding in order to avoid an oversized post:

• Skyscrapers and the Housing Crisis [Mark Thornton] Presented at the Ludwig von Mises Institute's 2009 Mises University held in Auburn, Alabama. (50 min)
  
• Skyscrapers and the Housing Crisis | Mark Thornton Lecture presented by Mark Thornton at the Ludwig von Mises Institute's 2010 Mises University conference, the world's leading instructional program in the Austrian School of economics.
  
• Skyscrapers and Economic Cycles: An Interview with Mark Thornton (The Lew Rockwell Show #25)
  

London's Shard, Britain's new tallest building - revisiting The Skyscraper Curse

I wanted to mention London's Shard for quite some time already, as part of debunking UK's bubble economy, but I never had the time to... until today. The DailyMail is actually running a report about it today, so I'll take the opportunity to write the post I wanted to do.

[...] The Shard - Britain's tallest skyscraper - is shaping up to be something spectacular.
The 87-floor tower will have 44 lifts and will be topped by a four-floor viewing gallery that will be open to the public.

But yesterday the businessman behind the mammoth London tower - currently 72-floors high - said 'it's not all about height', and revealed how the building was first sketched on the back of a menu. 

Speaking from the 24th floor of the Shard - which when completed will be the highest in western Europe - Irvine Sellar said his building would be known for more than its altitude.
Mr Sellar, who is chairman of the Sellar Group, said: 'It's not an ego thing. We're not the tallest building in the world by a long way, but we are the best-looking in Europe.' 

The Shard, which last month outstripped Canary Wharf's One Canada Square to become the tallest building in the UK, is the highest-profile part of a broader plan for a £2 billion redevelopment of the area around London Bridge Station.

Fast backward to early 2006 now:

Feb. 6 (Bloomberg) -- [...] it's time to revisit thatever intriguing economic indicator: the Skyscraper Curse.


As this columnist has pointed out periodically, there’s an uncanny, if unscientific, correlation between financial crises and efforts to build the world’s tallest building. Look no further than Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel.


The human propensity for architectural overreach has been a surprisingly reliable omen. It’s not a stretch to think of such projects as visual punctuation marks. A giant billboard made of steel, glass, concrete and money. A common thread between skyscrapers and economic disasters has to be easy credit, which fuels irrational growth, valuations, and hubris.

So we've been talking a lot about the collapse of the UK real estate bubble and more generally speaking bubble economy based almost entirely on the real estate and financial sectors. Maybe that time has come.

Dubai on the brink of collapse - The Skyscraper Curse [update]

In just a matter of 48 hours, I ran into a couple of articles describing the fall of the Dubai bubble economy, hugely driven by speculation in real estate (and propelled by easy borrowing and lax lending standard). I went to Dubai just for a week-end in January 2006 and I could tell that the fall will come and that it would hit hard.

Here are some quotes from a the Times Online and Bloomberg - and also very interestingly, Bloomberg made me discover an economic indicator that I had never heard about: the Skyscraper Curse. After digging, it appears that not only is this indicator is not new at all, but that it is quite reliable, for various reasons that will follow.

Let's first take a look at the Times Online article [emphasis mine]:

For many expatriate workers in Dubai it was the ultimate symbol of their tax-free wealth: a luxurious car that few could have afforded on the money they earned at home. Now, faced with crippling debts as a result of their high living and Dubai’s fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.

Police have found more than 3,000 cars outside Dubai’s international airport in recent months. Most of the cars – four-wheel drives, saloons and “a few” Mercedes – had keys left in the ignition.

Some had used-to-the-limit credit cards in the glove box. Others had notes of apology attached to the windscreen.

When the market collapsed and the emirate’s once-booming economy started to slow down, many expatriates were left owning several homes and unable to pay the mortgages without credit.

“There were a lot of people living the high life, investing in real estate and a lifestyle they couldn’t afford,” one senior banker said.

Under Sharia, which prevails in Dubai, the punishment for defaulting on a debt is severe. Bouncing a check, for example, is punishable with jail. Those who flee the emirate are known as skips.

The abandoned cars underscore a worrying trend. Five years ago the Emir, Sheikh Mohammed bin Rashid Al Maktoum, embarked on an ambitious plan to transform Dubai into a hub for business and tourism. A building boom fuelled double-digit growth, with thousands of Westerners arriving every day, eager to cash in on the emirate’s promise of easy living and wealth.

Many Westerners invested in Dubai’s skyrocketing real estate market, buying and reselling homes before building was even complete. But, as the recession took effect, property and financial companies made thousands of workers redundant and banks tightened lending. Construction companies have delayed or cancelled projects and tourism is slowing.

There are increasing signs that the foreigners who once flocked to Dubai are leaving. “There is no way of tracking actual numbers, but the anecdotal evidence is overwhelming. Dubai is emptying out,” said a Western diplomat.
[...]
Most of the emirate’s banks are not affiliated with British financial institutions, so those who flee do not have to worry about creditors. Their abandoned cars are eventually sold off by the banks at weekly auctions. Those recently advertised include BMWs, Porsches and Mercedes.
[...]
Police have issued warrants against owners of the deserted cars. Those who return risk arrest at the airport.

3.62 million expatriates in Dubai
864,000 nationals
8% population decline predicted this year, as expatriates leave
1,500 visas cancelled every day in Dubai
62% of homes occupied by expatriates
60% fall in property values predicted
50% slump in the price of luxury apartments on Palm Jumeirah
25% reduction in luxury spending among UAE expatriates
Sources: arabbusiness.com ; Times database

More useful information in this Bloomberg report:

Feb. 6 (Bloomberg) -- As construction cranes littering Dubai’s skyline go idle, it’s time to revisit that ever intriguing economic indicator: the Skyscraper Curse.

As this columnist has pointed out periodically, there’s an uncanny, if unscientific, correlation between financial crises and efforts to build the world’s tallest building. Look no further than Kuala Lumpur in 1997, Chicago in 1974, New York in 1930 and in biblical times with the Tower of Babel.

The human propensity for architectural overreach has been a surprisingly reliable omen. It’s not a stretch to think of such projects as visual punctuation marks. A giant billboard made of steel, glass, concrete and money. A common thread between skyscrapers and economic disasters has to be easy credit, which fuels irrational growth, valuations, and hubris.

The gleaming Burj Dubai, as fate would have it, recently overtook Taipei 101 as the tallest building at 818 meters (2,684 feet). Right on cue, Dubai’s economy is looking unthinkably shaky.

A year ago, with oil prices heading toward $200 a barrel, few dared question property prices in the United Arab Emirates. Now, there is evidence they “fell off a cliff” as banks reduced lending and speculators withdrew amid the worsening global crisis, Mai Attia, a Morgan Stanley analyst based in the sheikdom, said in a Jan. 30 report.

Strong language, and yet it’s a reminder of how far and wide a credit crisis that began in the U.S. is traveling. China, that other supposed juggernaut, is looking shaky, too. Japan is back in recession, while Singapore seems to have fallen off the same cliff as the U.A.E.’s asset markets.

Thanks to deteriorating economic conditions, job cuts and the unavailability of mortgages, Dubai property prices are down 25 percent from the market peak in September, Morgan Stanley said.

The implications of that will travel the globe. Take the Philippines, where money sent home from overseas workers in booming economies such as Dubai’s are taking a hit. Remittances make up about 10 percent of the Philippine economy, fueling purchases of homes and cars in a nation where private consumption accounts for about two-thirds of gross domestic product. That support is now questionable.

It’s easy now to look back and say we should have seen this coming. Some did, of course. After a Dubai visit in late 2006, Claudia Zeisberger [...] told me: “All the building going on made me feel like I was experiencing the last days of ancient Rome.”
[...]
Few seriously doubt Dubai is a development miracle. Yet it’s fair to wonder if it’s the epicenter of an Arabian asset bubble tied largely to surging energy prices. With crude oil now around $35, fortunes are shifting. Construction booms should have been a harbinger of trouble.

Where else should we be looking? Well, China. Of the 10 tallest high-rise buildings listed by Darmstadt, Germany-based Emporis Buildings, five are in the third-biggest economy and one is in its special administrative region, Hong Kong. Of the 20 tallest, nine are in mainland China or Hong Kong.

Hong Kong is already in recession and China may be heading that way. For a nation at China’s level of development, growth below 6 percent is arguably a recession and anything below 5 percent is crisis territory.

What skyscrapers say about China is investor overreach. The conventional wisdom was that China could grow 10 percent indefinitely. That view meant the numerous mini-Manhattans popping up around the nation were a logical extension of its potential. Or was it merely a textbook case of an easy-credit- driven boom going bust?

Russia may avoid a meltdown, meanwhile, thanks to billionaire Chalva Tchigirinski. In November, Tchigirinski halted construction on the Russia Tower, which would have been Europe’s tallest. Ditto for the U.S., where Donald Trump reined in his ambitions to erect America’s tallest building. His Trump International Hotel is the world’s 11th-tallest high rise.

The Skyscraper Curse may be nothing more than a whimsical exercise to entertain, not inform. Then again, it’s proving to have some pretty solid foundations as an economic barometer.

This report was by William Pesek who has also written on Bloomberg about the Skyscraper Curse before in December 2006 and in November 2007 which share a common base but are still worth having a read.

[Update] An interesting video on YouTube from a German TV report about the collapse of the real estate. I am wondering if I should hope for this guy who still wants to go on with his "Michael Schumacher" luxury tower to really make it to the construction or not, because if he does build it without selling them beforehand, I am 99% sure he's going to be bankrupt before the construction is over.

[Update 20110208] For an in depth analysis and discussion about the Skyscraper Curve, please read this post.