The 2006 report card of the construction industry seems to suggest that the once troubled industry is slowly but surely getting back on its feet. Advance estimates released by the Ministry of Trade and Industry indicate that the construction industry grew 4.7% quarter-on-quarter in 4Q2006 to register a year-on-year growth of 2.7% for 2006. This is the first year since 1998 that the industry has reported a positive growth.
On a general note, construction demand in Singapore is set to expand further, with S$17 billion to S$19 billion worth of contracts expected to be awarded in 2007 .
Construction demand in the Public sector is projected to grow at around 9% to between $5.2 billion to $6.0 billion in 2007, largely boosted by the redevelopment of old public housing, as well as the upgrading and building of new schools and institutions. In its effort to enhance the quality of life in Singapore, the National Parks Board puts forward the development of Garden by the Bay - three new garden waterfront properties at Marina Bay which is likely to begin construction works in October 2007.
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The increased activity and hype in the property market with high profile private property projects being snapped up has revitalized the construction sector with the construction demand from Private Sector growing over 50% to $12.5 billion in 2006 and is expected to moderate between $11.8 billion to $13.0 billion in 2007. High profile development projects such as the two integrated resorts, the Marina Bay Financial Centre, upmarket condominium projects at Marina Bay, Orchard Road and Shenton Way as well as the proposed petrochemical facilities on Jurong Island are expected to bring about a reverse in fortunes and improve the outlook for the construction sector.
Registering $2.2 billion in construction exports in 2005, the local construction industry has increasingly looked beyond the local market to seize new business opportunities presented by emerging countries such as the Middle Eastern Countries.
Growing by an average of 5% in Gross Domestic Product (GDP) in the last 3 years with total value of planned and active infrastructure projects exceeding US$1 trillion to date, the Middle East has planned for huge investment in infrastructure being made in ports, industrial parks, tourism, healthcare, telecommunications and Singapore’s largest trading partner in the Middle East, etc. Saudi Arabia will be investing US$624 billion worth of building projects over the next 15 years, while rapidly industrializing Abu Dhabi - UAE is investing US$136 billion in infrastructure, entertainment and hotels in the next 5 years.
Having taken the roller-coaster ride of Gross Domestic Product (GDP) plunging from S$13.9 billion in 1998 to $6.8 billion in 2006 , the construction sector is set to witness more drastic changes and challenges in comparison to other industries in Singapore. While the recent private property price surges in 2006 would suggest that better days are here again, it remains to be seen if this positive outlook is the beginning of good days to come for an industry that depends so much on the resources of Singapore’s neighbouring countries.
The recent ban by Indonesia on sand exports, for example, has adversely impacted Singapore-listed construction stocks with fears of a possible slowdown in the construction sector, which is recovering after years in the doldrums, and industry players have estimated that overall construction costs could climb 3-10 per cent as a result. Following the ban of land sand export and detention of tugboats carrying granite from Indonesia, prices of ready-mixed concrete have surged 148.45% to $200/m3, in comparison to $80.50/m3 in December 2006. Though the government has taken counter-measures to release sand from its stockpiles and source for land sand from other regional countries, it may take a while for the supply to resume to the original amount needed for construction activities.
In fact, the long-term solution as proposed by the Government is the use of alternative construction materials such as steel, glass and aluminium. Taking on the examples of overseas countries that have adopted alternative construction materials, steel construction is widely used in 70% of the commercial projects in United Kingdom, and 50% of the commercial projects and 26% of residential project in United States of America.
As this sector picks up along with improving economic conditions and higher demand for housing, the vulnerability of the construction sector to policy changes in neighbouring countries calls for continuous effort from developers and contractors to actively explore alternative construction methods and materials.
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