Construction Intelligence

Martin Riddett
Our Asia Pacific experts present latest data and intelligence about local trends for the construction industry.

China

Forecasts for China’s economic growth in 2013 are between 7.5% and 8% having achieved 7.7% Gross Domestic Product (GDP) expansion in 2012. 1Q 2013 figures indicate 1.6% expansion, slightly lower than predicted and contrasts with GDP over previous years (see graph below).

China GDP

The housing market is showing signs of recovery with knock on positive impact to retail sales. Positive sentiment is reflected by expansion in money supply and new loans increasing to CNY1.06Trillion. However foreign investment continues to fall causing continued reliance on domestic growth to fuel expansion. March 2013 figures were 5.7%, down from 6.3% in February 2013.

Inflation for consumers is down to 2.1% from 3.2% but this can be a volatile index subject to political manipulation. Labour costs have continued to increase at a much higher rate in many sectors.

Construction sector growth

Government expenditure figures below:

Government expenditure

Figures are in CNY100Million.

Year 2011 to 2012 construction expenditure slowed to a 9% year-on-year growth and forecasts for 2013 are hovering around an increase of 8.8% year-on-year growth. With foreign investment declining and the residential market only just recovering the emphasis will be on the government to increase expenditure in 2013.

Singapore

Singapore’s economy grew by 1.3 percent in 2012, following the expansion of 4.9 percent in 2011, and is forecast to grow by between 1 to 3 per cent in 2013. In Q4 of 2012, the economy grew by 1.5 per cent, which was an improvement on the flat growth recorded in the previous quarter. The construction sector grew by 5.8 per cent on a year-on-year basis in Q4, following the 6.7 per cent growth in the preceding quarter. On a quarter-on-quarter basis, the construction sector contracted by an annualised rate of 3.9 per cent, mainly due to the decline in private sector building activities.

The Building and Construction Authority (BCA) of Singapore reported that the total construction demand in 2012 was S$28.1 billion and is forecast to reach between S$26 billion and S$32 billion in 2013, reflecting a continued and sustained level of workload. The comparable figure for 2011 was S$35.5 billion, the slight drop in 2012 reflecting the completion of some major private sector projects in that year.

The public sector is expected to be the key demand driver in the construction industry, contributing about 65% of the total construction demand of between S$14 billion and S$17 billion, this coming primarily from public housing developments, institutional buildings and infrastructure projects.

It is also projected by the BCA that the private sector construction demand will be between S$12 billion and S$15 billion compared with S$18.8 billion in 2012, reflecting a more cautious stance in terms of new construction investments. This is heightened by uncertainties and problems resulting from the sluggish economic conditions in the West, the lingering Eurozone sovereign debt problems, as well as the implications of the Singapore government's property cooling measures and changes in foreign workers policies.

The BCA is optimistic that the industry's outlook for Singapore will remain promising over the medium term bolstered by the continued robust public sector construction demand, which would be anticipated to soften the impact of any fall in the private sector construction demand. Despite the subdued and challenging global economic uncertainties, the Singapore Ministry of Trade and Industry is maintaining its 2013 economic growth forecast at 1 to 3 percent.

The construction tender price index published by the BCA has shown a small increase in 2012 year-on-year, but has remained flat for the last quarter. Prices of key construction materials were generally slightly higher compared to a year ago due to some global inflationary cost pressures on raw materials. The Singapore construction industry is facing a labour crunch, with a stricter foreign manpower quota having a direct impact on the higher labour costs. Nonetheless, competitive tendering aided by the adequate contracting capacity built up from the previous peak may have helped to mitigate the upward pressure on overall construction tender prices.

We anticipate the tender price index will remain level over the next year but a small increase of up to 2 percent is still possible depending upon what happens to the global and regional economy, especially China.