Tag Archives: Construction

S’pore among 10 most expensive cities for construction

Singapore is the third most expensive Asian city to build in after Hong Kong and Macau, according to the latest International Construction Costs Index published by Arcadis, a global design and consultancy firm for natural and built assets.

Globally, Singapore is ranked 10th. New York is the world’s most expensive city for construction, followed by London and Hong Kong.

The annual Arcadis index analyzes the relative cost of construction across 44 major cities, and found that strong currency performance and significant resource constraints have seen these places command premiums of up to 60 percent compared with many European locations.

However, this price inflation comes at a cost, with the viability of major commercial and public sector schemes put at risk in these cities as prices continue to soar. Furthermore, rising costs and the falling value of currencies could restrict demand from emerging market investors in these areas, potentially triggering a shift in interest to lower-cost cities in the long term, noted Arcadis.

The consultancy stated that every construction market this year saw overall cost inflation restricted due to the drop in commodity prices. Particularly with oil, growing uncertainty over prices will have a long-term impact on the global construction industry.

Alan Hearn, Head of Buildings Solutions, Asia, said: “Singapore’s construction market has enjoyed a strong recovery since 2010. It is for this reason that the recent slowdown in residential and commercial markets represents something of a correction. In the private sector, both the residential and industrial sectors were relatively weak in 2015 and the office market also suffered due to oversupply.

“Looking ahead, continued investment in road and rail can be anticipated as these aspects of infrastructure have not received as much investment in recent years in Singapore.

“For Asia, China’s economic slowdown and weakening demand in many cities, including Singapore and Jakarta, mean that growth in the region is expected to ease as we enter 2016.”

Ho Chi Minh City, Kuala Lumpur, Bangkok, Bangalore and Taipei are among the world’s cheapest cities for construction, added the report.

The full report can be downloaded here.


Project delays caused by tighter rules on foreign workers

Singapore’s construction industry is suffering from late payments and project delays, as contractors are squeezed by higher operating costs and the government’s curb on foreign workforce, according to media reports.

“Construction demand is expected to continue with many big projects such as the MRT line extensions, Changi Airport expansion, but a shortage of workers means projects may cost more and take longer to complete,” said KPMG Singapore Partner for the building sector, Teo Han Jo.

In fact, more than half of the payment transactions in the sector were overdue in the second quarter, with the incidence of late payments increasing by 3.8 percentage points to 51.4 percent, revealed the Singapore Commercial Credit Bureau (SCCB).

Payments are considered late when over half of the amount owed is not satisfied on time, while prompt payments are made when at least 90 percent of the total amount is paid on the stipulated date.

But one of the most pressing issues for construction companies are the high levies on foreign workers. In fact, the operation of a subcontractor working on Downtown Line 3′s Upper Changi Station has been disrupted when it failed to pay such fees on three instances due to cashflow problems.

“Works on the DTL3 (Downtown Line 3) Upper Changi Station are progressing as normal. The sub-contractor . . . has foreign worker levy arrears and the main contractor, Samsung C&T Corporation, is in the process of taking over (its) workers. There is no impact to the schedule of the project,” a representative from the Land Transport Authority (LTA) said.

Despite these issues, the prospect of the construction industry appears promising due to the substantial number of projects in the long-term pipeline, particularly government infrastructure developments, noted Teo.

“Government agencies are also placing more emphasis on quality rather than just prices when awarding projects. The net effect of this for the construction industry is good over the longer term, as it raises overall quality and helps construction companies maintain healthy margins,” she added.