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Construction demand still strong

The Building and Construction Authority (BCA) expects this years construction demand to reach between $27 billion and $34 billion, of which 65 percent will come from the public sector or the highest proportion of construction demand since 2002, reported The Straits Times.

Despite the slowdown in private sector construction demand, there is still a strong pipeline of public sector projects, said Desmond Lee, Senior Minister of State for Home Affairs and National Development.

The sustained and healthy pipeline of projects offers the industry a chance to innovate, added Lee at a seminar jointly organised by the Real Estate Developers' Association of Singapore and the BCA.

The forecast also serves as a confidence booster for the industry, noted CIMB Private Banking economist Song Seng Wun.

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Projects for this year include the State Courts' new building in Havelock Square, new National Cancer Centre, PUB's water reclamation and sewerage works, JTC's Integrated Logistics Hub, Changi Airport's three-runway system, as well as the remaining contracts for the Thomson-East Coast MRT line.

Construction demand last year fell short of expectations as some major public contracts, like MRT projects, were deferred.

In 2015, construction contracts awarded stood at around $27.2 billion, down from the initial projection of $29 billion to $36 billion. Of this figure, the public sector accounted for $14 billion and the private sector $13.2 billion.

Nonetheless, last years total construction output or progress payments for work done was high at around $35 billion due to the robust demand seen during the preceding two years. This contributed to around 4.7 percent of the GDP in 2015. This year, construction output is expected to drop to between $32 billion and $34 billion, due in part to the lower demand last year.

The construction sector accounts for about five percent of GDP, so the projection is unlikely to have a big swing on the overall economy, but every dollar counts, said UOB economist Francis Tan.

The BCA expects average construction demand for the next two years to be sustained at between $26 billion and $35 billion.

The public sector is expected to account for $16 billion to $20 billion of the annual construction demand from 2017 to 2020. Of this figure, 60 percent will come from building projects while the rest will come from civil engineering works, like the North-South Expressway and associated infrastructure works for Changi Airport Terminal 5.

I think many of our construction companies are quite adaptable, and quite a number... also have a lot of civil engineering capabilities, said BCA Chief Executive John Keung.

Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg

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