The pace of cost increases has been rapid and unsettling for businesses so the government is implementing key measures to address office space constraints and spike in construction costs.
Construction demand will continue to build up this year, with projected value of contracts to hit up to S$27 billion. At the same time, construction costs are climbing as well. Finance Minister Tharman Shanmugaratnam said this is due to expensive raw materials and work on major projects like the integrated resorts and petrochemical plants.
To ease the pressure, the government had previously rescheduled S$2 billion worth of developments to 2010 and beyond.
"We have now decided to defer another close to S$1 billion of projects. This deferment will only affect projects which are less urgent. Key investments such as the expressways, the Downtown Line and the NUS University Town will not be affected," said Mr Tharman.
There will also be measures to tackle another short-term problem – the crunch in office space. This is caused by a surge in business growth, especially in the business and financial sector.
As office rental costs have risen sharply, Mr Tharman said Singapore must keep its business costs competitive relative to other major cities. On average, office space in Singapore costs 30 to 50 percent less, compared to Hong Kong and Tokyo.
The government expects the supply crunch to ease over the medium term as an extra 1.4 million square metres will be available by 2012 in the Marina Bay area.
Companies are also moving to transitional sites and new regional centres outside the city.
Soon, government agencies will follow suit and relocate - up to 20,000 sqm of office space in the city will be freed up for the private sector by the first quarter of 2009.
Mr Tharman also noted the good showing in what he called "an exceptionally buoyant property market" last year. Transaction volume rose by 60 percent, hence gains from stamp duties and other revenues were S$3.4 billion above what was expected. - CNA/so
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