Projects in the works will see value shrink Drop of 20-30% in 2009 partly due to halted residential developments

December 20, 2008

By ARTHUR SIM

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.

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.