June 25, 2007


Construction frenzy puts squeeze on resources

By Tan Hui Yee

NIGHTS are no longer as idyllic as before on Marina Bay, where at least 20 construction cranes indicate building activity proceeding at a fever pitch.

The site of an integrated resort as well as new offices and homes is at the heart of the buzz in the construction industry.

Elsewhere, commercial complexes and condominium developments have been coming onstream at a breakneck pace, putting the squeeze on a building industry that has only recently come out of the doldrums.

The sector grew by a sizzling 9.7 per cent between January and March alone - the strongest quarterly showing in nine years.

This feverish activity is taking place against a backdrop of higher costs for construction materials and labour - more than 10 per cent higher than a year ago, in some cases, estimated the Singapore Institute of Surveyors and Valuers (SISV).

Contractors are feeling the heat as they race - sometimes working round the clock - to meet building deadlines.

Mr Goh Ngan Hong, president of the SISV's quantity surveying council, told The Straits Times: 'The volume of work coming onto the market is more than the industry can handle - too many projects are chasing too few good contractors, hence the destabilising effect on prices.'

Piling contractor Foo Hee Kang of Resource Piling, whose company is working on the Marina Bay Financial Centre, clocks 80 to 90 hours a week.

His piling machines are spread out over six to seven projects at any one time, and there is 'practically no waiting time between jobs', he said. He has rejected several jobs simply because his company is too busy.

And he has had to pay his workers up to twice what he did a year ago just to keep them.

Another builder, Hor Kew, is paying fresh engineering graduates about $2,600, up from about $2,200 a year ago.

Companies strapped for staff are resorting to poaching employees from other companies. For instance, Kienta Engineering Construction, a major Housing Board contractor, lost four senior employees in the past three months to other companies.

At the heart of this crunch is the work on the two integrated resorts, worth $10 billion together, and which will be completed in just two or three years.

This, coupled with the many private estates being redeveloped following the recent rash of collective sales, has fuelled a surge in construction demand.

A report by property consultancy CB Richard Ellis last week counted 67 private estates sold collectively since January for a total of $7.92 billion.

Contractor Tiong Seng's director, Mr Andrew Khng, noted that once collective sales go through, developers want the new condominium up as soon as possible.

'If we can have a bit of a breather, it would be good,' he said.

The value of building contracts awarded last year jumped 41 per cent to $16.1 billion, after staying at about $11 billion in the past two years.

This year, the figure is forecast to hit $17 billion to $19 billion.

Within Singapore, the price of ready-mixed concrete more than doubled earlier this year after Indonesia abruptly banned the export of concreting sand and detained several barges carrying granite to Singapore.

Although concrete prices have since stabilised, overall costs are still heading north as more projects are started.

Demand from the Middle East, India, China, South Korea and Britain for building materials is also pushing prices up, said the SISV's Mr Goh.

To ease the manpower crunch, the Building and Construction Authority (BCA) has worked with the Ministry of Manpower to relax the quota of workers allowed to be hired from countries such as India, China, Bangladesh, Myanmar and Thailand.

To expedite matters, it has approved the setting up of five new overseas centres - on top of the existing 15 - to test the skills of prospective workers in their home countries.

The BCA is also looking into expanding the list of qualifications it accepts for site supervisors from other countries so that more of them will be cleared to work here.

Meanwhile, owners of smaller developments with less cash to flash will probably have fewer contractors to choose from, as the more established ones get selective about what work they do.

When property agent Eric Cheng tendered out a job to redevelop a terrace house in Crane Road earlier this year, only four bids came in - at prices more than 8 per cent above his budget of $170 per square foot. A year ago, such a tender would have drawn eight bids.

He chose not to award the tender. Instead, he will call for another one after getting his architect to redesign the house using cheaper fittings and lower-grade granite flooring, for example, to cut costs.

The SISV's Mr Goh predicted that prices are expected to head upwards until mid-2010.

Meanwhile, the BCA reckoned that the manpower squeeze will ease in two to three years.

But the construction industry - which just three years ago was grappling with stalled projects as cash-

strapped contractors went under - views the current strain on resources positively.

Mr Desmond Hill, president of the Singapore Contractors Association, said: 'These are good problems. It means the jobs are there, the market is there.'

Hor Kew's managing director, Mr Aw Leng Hwee, is equally upbeat.

He said: 'At least now, we can get profit margins. In previous years, when we bid at break-even prices, we could not even get the job.'

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