Skyscraper index alarm for China

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China skyscrapersPA

Skyscrapers are meant to be the embodiment of confidence in a booming economy. The taller the building, the better you are doing and the more your businesses are thriving.

The problem is that history shows us they actually tend to be built at exactly the wrong time, heralding economic disaster. So what's going on, and why does this spell trouble for China?

It seems counter-intuitive. Surely only when a country is thriving will it throw up an audacious and expensive piece of real estate, safe in the knowledge that blue-chip tenants will soon be flocking to take up space.

Built at the dawn of crisis

In reality, this is far from true. Classic examples of skyscrapers spelling trouble include the Empire State Building, built at the start of the Great Depression; the world's tallest building, the Burj Khalifa, completed just as Dubai hit the skids; Sear's Tower in Chicago completed at the time of the massive oil shock in 1974; and Malaysia's Petronas Towers which were built in 1997 at the moment Asia went into meltdown.

In fact, the world's first skyscraper, the Equitable Life building in New York, was finished in 1873. That year ushered in five years of economic misery, and the building was knocked down in 1912.

Why tall is bad news

Barclays Capital puts together an annual index of skyscrapers and matches them with economic performance. It says there is an "unhealthy correlation" between when tall buildings are completed and financial crashes.

It says the building of truly massive buildings reveals that an economy has got ahead of itself. They are the embodiment of over-confidence and poor decision-making when it comes to allocating investment capital. It truly is the pride that comes before the fall.

China worries

China is the biggest builder of skyscrapers at the moment - and astonishingly is building 53% of all the skyscrapers currently under construction. Barclays warns that investors here should take note.

The building boom has much to do with the financial crisis, which saw a concentration of investment in China and a property boom. Easy borrowing and strong returns are driving massive building projects, and surely must be a sign of a bubble in the process of inflating.

Those ploughing their money into India may also get the collywobbles, as it currently has 14 skyscrapers in the works - even though it only currently has two over 240 metres tall.

And for those who feel that things couldn't get any worse in the UK, there is the Shard, set to be Western Europe's tallest building, currently under construction in London. Whether its completion will herald yet more woes for the country remains to be seen.

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