Building sector uneasy with cool demand up to May

But prelim figures for June, upcoming projects paint brighter picture

(SINGAPORE) The value of construction contracts awarded in the first five months of the year was less than hoped for, keeping the building industry on edge.

Nevertheless, authorities are keeping their full year construction demand forecast intact as preliminary June figures and upcoming projects paint a brighter picture of the industry.

According to figures released by the Building and Construction Authority (BCA) to the public, construction demand from January to May was $8.17 billion. Some 59 per cent or $4.84 billion of this came from the private sector, and the remaining 41 per cent or $3.33 billion was from the public sector.

The demand up to May - compared with BCA's full year forecast of $21-27 billion - triggered some unease among industry insiders.

'It looks as though the target of $21-27 billion may not be reached this year,' said Rider Levett Bucknall (RLB) managing partner Winston Hauw yesterday. He was giving an update on how the construction sector has fared at a conference organised by the Real Estate Developers' Association of Singapore (Redas).

He cited other figures from BCA that implied slowing construction demand. The value of contracts awarded in April and May was $2.6 billion, which is around 18 per cent less than the $3.1 billion in the same period last year.

Davis Langdon & Seah director Seah Choo Meng shared similar concerns with BT. 'Contractors feel that there is still not enough work in the market,' he said.

Construction demand has come off sharply from the record $35.7 billion in the boom year of 2008. The subsequent economic slowdown forced many private sector projects off the pipeline, and the construction sector was left with excess capacity after completing large jobs.

The arrival of more foreign contractors looking for work as construction demand dries up in markets such as Dubai has exacerbated the situation. 'Competition is high at the moment,' said Lum Chang Building Contractors executive director Tan Wey Pin.

While the current situation does not look too promising, Mr Hauw, Mr Seah and Mr Tan hesitated to write off the year's performance. Construction demand might still meet BCA's full- year forecast if the public sector awards more contracts later this year, they said. One of the most awaited projects is Stage 3 of the MRT Downtown Line.

Still, there is hope. In response to queries from BT yesterday, BCA shared preliminary figures on the value of construction contracts awarded from January to June - about $11 billion.

Going by the agency's mid-year review, another $10 billion to $16 billion worth of contracts are likely to be awarded in the second half.

These projects include the widening of Keppel Viaduct and the conversion of the former Supreme Court and City Hall to the National Art Gallery. Contractors will also be needed for the International Cruise Terminal, Lanxess Butyl's synthetic rubber plant, and various condominium developments.

'This will bring the total construction demand for this year to $21-27 billion, similar to the original projection released by BCA in January,' said a BCA spokesperson.

At yesterday's seminar, Redas launched a new Real Estate Sentiment Index, which it developed jointly with the National University of Singapore's real estate department.

'Redas will work even more closely with higher institutes of learning, professional bodies and government agencies to embark on new initiatives in research and executive programmes,' said Redas president Simon Cheong.

Source: Business Times, 30 Jul 2010