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Building boom may lift deals to new high

Record $24.5b in contracts last year, with private sector leading the way

ROCKETING demand propelled the construction industry to record levels last year, eclipsing even the glory days of 1997, with even more to come this year.

Contracts totalling $24.5 billion were awarded last year, up 46 per cent from the $16.8 billion in 2006 and just above the $24 billion in the boom year of 1997.

The figures cover private projects and public works, such as new MRT lines, but private sector demand was the key driver behind the record numbers.

Mega projects like the Marina Bay Sands integrated resort (IR), Marina Bay Financial Centre and Somerset Central lifted private commercial contracts to a record $5.1 billion, according to official figures announced at an industry seminar yesterday.

Demand shows no sign of slowing, with contracts for this year forecast at between $23 billion and $27 billion, depending on whether some large projects get held back.

The bulk of the demand this year and next will come from developments such as the IRs and the Downtown MRT line.

Construction stocks also prospered. Chip Eng Seng closed at 55 cents yesterday, below its high last year but up from a low of 31 cents last March. Lian Beng Group has risen from a low of 22 cents in March to 63.5 cents yesterday.

But there are concerns amid the bright outlook, including rising costs.

Dr Mohamad Maliki Osman, Parliamentary Secretary for National Development, told the Construction and Property Prospects 2008 seminar that high demand will keep exerting pressure on resources.

This demand has already placed ‘a tremendous strain’ on resources and has led to a ‘chaotic price escalation’, said Mr Seah Choo Meng, executive chairman of Davis Langdon & Seah Singapore, one of the seminar speakers.

He warned that if prices are not reined in, they will hurt the industry and even the overall Singapore economy.

‘There will be some negative impact this year, but we have built up a momentum which can be maintained for the next two years,’ he said.

The Government has reduced some pressure by putting more than $2 billion worth of projects on the backburner until 2010 at least, with more to come.

‘All ministries are currently combing through their list of projects to identify more projects for rescheduling,’ said Dr Maliki.

He urged the industry to move towards sustainable construction, which is environmentally friendly and can enhance Singapore’s resilience against supply fluctuations in basic construction materials.

He also said the Building and Construction Authority (BCA) will release information on demand to enable the industry to get a better feel of the market and plan more efficiently.

It has all been a stark turnaround for a sector that was in the doldrums just three years ago. Now that things are rosier, contractors are facing new challenges.

The industry continues to grapple with the uncertainty of material prices, said Singapore Contractors Association president Desmond Hill.

Ready-mixed concrete is around $130 a cu m, compared with about $190 during the Indonesian sand ban last year and $74.40 at the end of 2006. Prices could rise to $150 per cu m in the next few years.

Steel bars cost about $1,000 a tonne, up from $744 a year ago, said the BCA.

There is also a lack of middle management staff as many bailed out of the sector in the last downturn, Mr Hill said.

 

Source: The Straits Times 16 Jan 08

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