Construction sector set for positive performance

[SINGAPORE] While construction will contribute positively to economic growth in 2014, its impact is likely to be moderated.

Figures released by the Building and Construction Authority (BCA) yesterday forecast construction demand this year at between $31 billion and $38 billion. Last year, construction demand hit a record $35.8 billion, preliminary estimates showed.

For the full year, total construction output, or payment for work done, is estimated at about $33 billion. The outlook for on-site construction activities is expected to brighten, to between $34 billion and $36 billion for 2014, and $29 billion to $37 billion annually for 2015 and 2016, owing to the high level of contracts awarded since 2011.

"On the back of an increased workload, the construction sector's GDP continued one of its longest run of expansion, although at a moderated pace of about 5.5 per cent in 2013. Correspondingly, the construction sector's share of economic GDP sustained at about 4 per cent in 2013 amid improved performance in other major economic sectors," said Lo Yen Lee, director (economics research department), business development group, at BCA.

Speaking at the annual BCA-Redas Built Environment and Property Prospects seminar yesterday, Ms Lo noted that year on year construction GDP growth this year is likely to continue to moderate, as it is coming off a high base.

According to advance estimates released by the Ministry of Trade and Industry earlier this month, the construction industry grew 4.7 per cent year on year in Q4 last year, easing from 5.8 per cent the previous quarter.

The slowdown was primarily due to the moderation in the growth of private-sector construction activities. The industry contracted at an annualised rate of 6.9 per cent, compared with the 1.7 per cent expansion in the previous quarter.

"Construction will very likely contribute positively to growth in 2014, although to a lesser extent than 2013," said Barclays economist Joey Chew.

While the land sales programme has been cut back, there is a large pipeline of infrastructure projects in the wings, on top of existing building activity that will continue into 2014, she noted.

Public infrastructure works can be expected to support construction demand in view of Singapore's capacity constraints and the Population White Paper 2013, said UOB economist Francis Tan.

According to BCA's estimates, the public sector is expected to contribute close to 60 per cent (equivalent to $19 billion to $22 billion) of the industry's total demand in the coming year, compared with $14.8 billion last year.

Construction demand for institutional projects is expected to see the biggest jump, from $3.6 billion to $7.6 billion. Civil engineering projects will also receive a boost, with construction demand expected to increase to $10.3 billion from $6.8 billion, followed by industrial projects, to $6.3 billion from $5 billion.

The private sector on the other hand is expected to take a back seat in driving construction demand because of current market volatility, said the BCA.

Demand from the private sector is expected to moderate to between $12 billion and $16 billion from $21 billion last year, as the sector grapples with the government's attempts to stabilise the property market, the substantial supply of completed housing units coming on stream over the next few years, as well as the scaling back of new government land sales for the first half of 2014.

Construction demand for the private residential segment will likely halve in the coming year, to $5.2 billion from $10 billion. Construction demand on the public residential front is however forecast to dip to $5.5 billion from $6.6 billion last year.

For 2015 and 2016, average construction demand is projected to be sustained at between $25 billion and $34 billion per annum.

Lee Yi Shyan, Senior Minister of State for National Development and Trade & Industry, who was the Guest of Honour at yesterday's event, launched BCA's "Quality Mark Homes" mobile application. It helps homeowners search for residential developments that are certified under the BCA Quality Mark Scheme as well as access information on acceptable construction workmanship.