Published December 12, 2009

Construction costs in Singapore slide: study

Fall takes nation's index close to Dubai's; most cities showing a rise are in China, including Beijing, Shanghai, Guangzhou and Shenzhen


CONSTRUCTION costs in Singapore have dropped more than those in other cities, a study by Rider Levett Bucknall (RLB) found.

The construction cost consultancy gathered data from more than 30 markets to construct indexed measures of cost. In its International Construction Cost Relativities ranking, the Singapore index fell to 93 in October from 112 in January - a 17.3 per cent decrease.

The decline took Singapore's index close to that of Dubai. The Dubai index slipped to 93 from 110 over the same period - the second-largest percentage decline of 15.5 per cent.

'Construction costs have been reduced by up to 30 per cent with major slowdowns and renegotiations for projects under construction, regardless of contractual arrangements,' RLB said of the situation in Dubai, in its October international report.

Construction costs in Macau also fell considerably - the Macau index slid 12 per cent to 92 from 104.

With the big fall in construction costs in Singapore, it has become slightly cheaper to build here than in Hong Kong. The Hong Kong index dropped to 99 in October from 107 in January, down 7.9 per cent.

Most of the cities that displayed a rise in construction costs in RLB's study are in China - Beijing, Shanghai, Guangzhou and Shenzhen. But on the whole, these cities remained some of the cheapest for building.

Construction costs in Singapore rose steadily during the boom years as more projects - ranging from residential developments to civil engineering works - streamed into the market. The increased demand coincided with spikes in material and commodity prices to drive up costs.

The value of private and public sector contracts awarded for new works grew from $16.8 billion in 2006 to $24.5 billion in 2007 and $34.6 billion in 2008. Also trending up was the Building and Construction Authority (BCA) Tender Price Index, from 103.2 points in 2006 to 122.5 in 2007 and 137.3 in 2008.

But with the onset of the financial crisis and economic slowdown from end-2008, developers held back plans. BCA's forecasts up to October point to construction demand of just $17.3 billion this year - a potential 50 per cent drop from last year.

Fewer projects will lead to lower construction costs. The BCA Tender Price Index as at the third quarter was 113.6 points - down 17.3 per cent from 2008.

'Building tender prices continued their downward trend for the first six months of 2009, as the reduced volume of available building tenders in contrast with the 2008 peak, resulted in greater competition among contractors,' RLB says in its report.

It estimates that it would cost between $195 and $344 per square foot of gross floor area to build a multistorey residential development for owner-occupation in Singapore. When it comes to a retail mall, the equivalent cost would be between $181 and $274.