Financial slowdown may ease construction costs

Source : Sunday Times - 12 Oct 2008

THE financial slowdown may actually spell good news for the construction industry.

Mr Simon Lee, executive director of the Singapore Contractors Association, said the downturn will most likely stabilise the cost of construction materials.

He noted how prices of materials had escalated tremendously in recent times and far exceeded their estimated cost during the tender stage of projects.

A spokesman for the Building and Construction Authority (BCA) also said the increase in construction costs will be moderated if prices of construction materials soften.

Ms Chua Chor Hoon, research senior director for DTZ Debenham Tie Leung (South-east Asia), said the slowdown in the property market will ease the bottlenecks and rising costs in the sector.

‘This is good as the frenetic pace experienced over the last two years is not sustainable.’

She added that it is likely that costs in the public construction industry will ease as projects get deferred or are aborted.

Rising construction costs can be traced back to early last year after Indonesia banned the export of construction sand and granite to Singapore.

The worldwide economic boom resulted in an increase in demand for other construction materials.

Manpower costs shot up as well due to the high number of projects but limited number of skilled workers.

As a result, many construction projects have been delayed.

The United World College said last month that its upcoming campus in Tampines would not be ready by 2010.

Last year, the Government announced the delay of $4.7 billion worth of public sector projects to ease pressure on construction demand. The delayed projects include a new hospital in Jurong and a complex that will house the Communicable Disease Centre.

But other projects, like Resorts World in Sentosa, are still going ahead as scheduled.

Ms Krist Boo, its vice-president for communications, said the integrated resort is on track for its soft opening in early 2010. ‘We are fortunate to have already awarded most of the major construction contracts for our resort,’ she said.

The majority of public construction projects are also expected to go ahead.

The BCA spokesman said it expects total public construction demand to reach between $10.5 billion and $13.5 billion this year as the Government is proceeding with essential infrastructure projects such as the Marina Coastal Expressway, MRT Downtown Line and Gardens by the Bay.