Projects In The Works Will See Value Shrink

Source : The Business Times, December 20, 2008

Drop of 20-30% in 2009 partly due to halted residential developments

THE value of projects under construction in Singapore could fall by 20-30 per cent to some $17 billion in 2009. And according to construction information services provider BCI Asia, about 45 new residential developments in various stages of design and development have been put on hold this year, exacerbating the contraction of construction contracts.

SLOWDOWN - Public building works worth about $4.7 billion were deferred in 2008. These were reported as ranging from $10 million to $400 million

BCI Asia's database is derived from developers, architects, engineers and contractors who have reported project delays. These occur at various stages of development, including design, documentation, tender and the awarding of contracts.

For 2008, it estimated that the value of projects under construction here was about $25 billion.

BCI Asia's figure is also more conservative than official figures which put the total value of contracts in 2008 at between $27 billion and $32 billion.

Thor Kerr, managing director at BCI Asia, added that the decline in construction follows a significant rise in construction contracts over the last year and any drop in the figures should be judged in this context.

He also said that compared to other South-east Asian countries, Singapore's construction industry has the most to gain from government spending including infrastructure projects. BCI Asia estimates that for 2008, there were about $4 billion worth of infrastructure projects alone.

The government has also recently said that it could bring public construction contracts forward.

Public building works worth about $4.7 billion were deferred in 2008. These were reported as ranging in value from $10 million to $400 million and included the Jurong General Hospital, the National Art Gallery, the National Addiction Management Centre, the Communicable Disease Centre and an extension of Changi Prison.

The total public construction demand for 2008 has been reported to reach between $10.5 billion and $13.5 billion this year.

On the downside, BCI Asia expects construction spending in cities such as Singapore and Hong Kong to suffer most from the slowdown in the global economy, attributed to a slowdown in construction in the CBDs.

In its survey of Asian markets consisting of Singapore, Hong Kong, Indonesia, Malaysia, Philippines, Thailand and Vietnam, it estimates that, out of the total US$140 billion of construction projects, a fall of 16 per cent in 2009 to US$118 billion is possible, assuming a 'low-growth economic trough' scenario.

Mr Kerr said: 'All data indicates that construction spending in this region peaked in 2008. The value of projects at design and documentation phases has contracted by 2 per cent this year and we have seen major projects abandoned for lack of finance.'

In a worst-case scenario, if the economies of these cities suffer a 'deep recession', BCI Asia believes the total value of construction contracts could fall to US$96 billion, representing a contraction of over 30 per cent.

BCI Asia's forecast is from an upcoming study of how the construction sector has reacted to changing economic conditions since the 1997 Asian financial crisis. In this study, it was noted that during the recent trough of 2002, the total value of construction projects had fallen to $47.9 billion, 66 per cent lower than the 2008 peak. However, Mr Kerr said that it is unlikely that the value of construction contracts would fall to this level again.