Construction job growth is expected to top 8 percent this year with the sector swelling to 31,750 jobs, according to the University of Hawai'i Economic Research Organization. Job growth is expected to slow to about 3 percent next year with overall employment rising to 32,700 jobs.

The value of private and public contracts should rise 8 percent to $3.99 billion next year. However, beyond 2006 higher interest rates, energy costs and the possibility of a slower U.S. economy could lead to a cooling in one of Hawai'i's hottest sectors. The construction industry is among the state's largest sectors behind tourism and the military.

Higher costs coupled with high housing prices, which make homes less affordable, mean the current building boom could peak within the next several years, UHERO reported. Median home prices around the state have roughly doubled in the last four or five years.

"As expectation of price appreciation decline and rising interest rates and construction costs mount, Hawai'i real estate will become a less attractive investment, particularly for offshore investors," according to UHERO's forecast. "Growth in total contracting receipts is expected to slow to its cyclical peak over the next several years."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.