Singapore’s poor performing property market dragging construction sector down with it
According to analysts from BMI Research, the property market has been bombarded with issues such as increasing supply across segments, a weakening economy, rising interest rates and tightening immigration policies, falling with the construction sector like two dominoes.
“Singapore’s construction sector expanded by 2.5% y-o-y in Q215, bringing real growth for H115 to 1.8% y-o-y. This represents a significant slowdown from the 5.2% real growth registered over H114,”
BMI Research said the subdued growth has been led by the private sector.
“Private contracts awarded in H115 contracted by 30.9% y-o-y, significantly lower than public construction, which declined by 16.8% y-o-y over the same period,” they said.
Meanwhile, the labour crunch brought about by stricter immigration policies are also projected to reduce the pace of construction projects.
“Although we note efforts by the government to ease such manpower constraints through Singapore’s 2015 budget, in which the government altered the pace of levy increases for some foreign workers at the low-to-mid skilled levels, we do not expect a significant change in the government’s foreign worker policy in the near-future, due to the political realities in the land-scarce country,” BMI Research said.
However, public projects remain the lone bright spot in construction activity and is set to buttress the sector for 2015-2019.
“Over the next five years, developments projects such as Project Jewel and the North-South Highway project (expected to commence in 2016) will boost construction activity,” BMI Research said.
Analysts are of the opinion that things will improve past the 2019 mark, as public infrastructure projects are set to hold even great opportunities for growth, spearheaded by the government’s plan to double the city state’s urban railway network from the current 178km to about 360km by 2030.
“The Kuala Lumpur (KL)-Singapore high-speed rail (HSR) project will be another major development. The project is expected to be complete by 2022, with Singapore’s terminus station located at Jurong East. Completion of the HSR project will in turn spur development projects within the Jurong Lake District,” BMI Research said.