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Thread: Projects in the works will see value shrink

  1. #1
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    Default Projects in the works will see value shrink

    http://www.businesstimes.com.sg/sub/...03140,00.html?

    Published December 20, 2008

    Projects in the works will see value shrink

    Drop of 20-30% in 2009 partly due to halted residential developments

    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.

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    http://www.straitstimes.com/Money/St...ry_316617.html

    December 20, 2008 Saturday

    Bleak times ahead for region's building sector

    Report sees value of projects shrinking but analysts say situation here will be better

    By Elizabeth Wilmot


    THE construction sector in South-east Asia and Hong Kong faces bleak times next year, a new report by information provider BCI Asia has found.

    The value of projects under construction in the region would contract by at least 16 per cent next year and, in a worst-case scenario, would shrink by a hefty 32 per cent - or about one-third.

    The preliminary forecast is part of a major study on the construction industry to be released by the firm next month.

    'All the data indicates that construction spending in this region peaked in 2008. The value of projects at design and documentation phases has contracted 2 per cent this year and we have seen major projects abandoned for lack of finance,' said BCI Asia's managing director Thor Kerr.

    'There will be far fewer new industrial facilities and utilities being constructed from 2009. As local economic conditions deteriorate further, developers will postpone the construction of new offices, hotels, recreation facilities and downtown retail centres,' he said.

    BCI Asia reported that the value of projects under construction leapt from US$107 billion (S$154 billion) last year to US$140 billion this year. It estimates that this will decline to US$118 billion next year in a best-case scenario.

    In the most pessimistic recession scenario, the value of the projects under construction would slump to US$96 billion.

    Despite the grim predictions, some analysts say Singapore will not be as badly hit as the region as a whole.

    Mr David Cohen of Action Economics said: 'I think the situation in Singapore would not be as severe. There is still a substantial backlog of projects to go through.

    'The growth might slow down next year and we might see some job losses, but there would not be a major impact on the economy.'

    Mr Cohen predicted that there would be a contraction of less than 5 per cent in the construction sector here next year.

    Mr Ng Yek Meng, assistant secretary-general of the Singapore Contractors Association, agreed that things were still looking stable for the year ahead.

    'In general, the trend is that the construction industry is slowing down.

    'But in the next 11/2years, most contractors should have enough jobs and work in hand. When they signed on for jobs in 2008, they signed two-year contracts,' he said.

    'We also haven't seen any major retrenchments yet.'

    He added that major construction projects such as that of the SMRT Downtown Line would continue to help boost the local industry.

    But he warned of impending uncertainties for the industry in 2010, after the two integrated resorts have been constructed, and when contracts come to an end.

    'After contractors have finished their jobs, there might be no new jobs and some might have to go overseas to search for new projects,' Mr Ng said.

    'No one knows what's going to happen in the future for now.'

    [email protected]

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    http://www.todayonline.com/articles/293576.asp

    Weekend, December 20, 2008

    Big drop in building activity

    Esther Fung

    [email protected]


    THE value of projects under construction in Singapore is expected to be slashed next year, with the biggest impact to be felt in the central business district.

    The value of construction activity in Singapore is likely to fall 32 per cent to US$17 billion ($24.6 billion) next year from US$25 billion this year, said BCI Asia Construction Information, a construction industry research company that undertook a study of the region’s building sector.

    “The greatest impact in 2009 and 2010 will be felt in the CBD, in Singapore and Hong Kong,” said Mr Thor Kerr, managing director of BCI Asia.

    As funding becomes scarce and rents start to soften, the high-end commercial and residential sector is likely to see more deferred construction activity next year, compared to projects in infrastructure and in the industrial space.

    BCI Asia’s prediction is in line with forecasts from the Building and Construction Authority, which expects construction demand here to reach $30 billion this year, and slow down in the next two years.

    “But in past crises, we see in these urban areas, at least Singapore and Hong Kong tend to bounce back very quickly. They bounce back slower in Indonesia and in other places,” said Mr Kerr. He added that Government spending on housing and other projects will help mitigate the slowdown.

    Mr Kerr said that the decline in construction activity next year should not be taken as grim news because the value of these projects are not slipping to the levels seen during the Asian financial crisis.

    “You’ve got to put it in context; US$17 billion gets you back to where you were in 2006. We’re getting back to a more reasonable level,” said Mr Kerr.

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