Saturday, November 22, 2008

Construction Sector's Growth Flagging

Source : The Business Times, November 22, 2008

THE recent construction boom, after a prolonged downturn from the late 1990s to 2005, is starting to fade.

After a strong 20.3 per cent year-on-year growth last year, the construction sector sustained that momentum to report an 18 per cent growth rate in the first half of 2008. However, in this year's third quarter, growth slowed to 12.8 per cent, an upward revision of the 7.8 per cent advance estimate, but a figure which still suggests that the sector's recovery may be short-lived.

The construction sector's contribution to real gross domestic product (GDP) rose four per cent to $2.4 billion in Q3 from $2.3 billion in Q2.

In a report released yesterday, MTI economist Wee Shu Lin said that overall construction demand will likely weaken on the back of a slowdown in global and local property markets.

As the worldwide financial crisis worsens, demand for commercial and industrial space is set to decline, and local private residential property prices and transactions have already started falling.

According to the report, more expensive construction materials, higher wages for professionals and managers, and higher rental costs for construction equipment were key in driving construction tender prices up over the past two years.

As these input costs have begun adjusting downwards and contracting capacity eases in tandem with slowing demand, construction tender prices are expected to moderate in 2009, the report said.

No comments: