As the world shows early signs of recovery from the worst economic downturn for over 70 years, our latest review takes a closer look at some local construction markets.
Industrial Building Parities/Index
Index: February 2010
|Index city||Parity range||Exchange rate||Currency||Index|
|United Kingdon||London||0.93 - 1.07||1.00||GBP||100.0|
|Ireland||Dublin||1.23 - 1.41||1.13||EUR||116.6|
|USA||Chicago||1.31 - 1.51||1.53||USD||92.2|
|China||Shanghai||6.17 - 7.38||10.45||CNY||64.8|
|Singapore||Singapore||1.83 - 2.13||2.16||SGD||91.8|
|UAE||Dubai||4.76 - 5.7||5.62||AED||93.1|
Construction prices have fallen approximately 16% from the peak of 4th quarter 2007, with recovery in the Tender Price Index (TPI) not expected until 2nd quarter 2011. New work output fell by approx 13% during 2009 with the construction continuing to be hit hard as the UK economy spent the whole of 2009 in recession.
Recovery in the sector is likely to be led by private invested works as public funded work is expected to be cut back as the UK seeks to deal with the level of public debt. The private residential and commercial sectors have shown increases in output in the last quarter of 2009 with all public sector works seeing a reduced output to previously reported figures.
The recovery of the construction industry is, however, showing signs of stalling as the country prepares for a general election, anticipated in May 2010.
The construction industry in Ireland has been declining every month for the last 3 years with no sign of a reversal. Investment in construction and employment within the sector has reduced by 30% and 40% respectively.
Central government expenditure on construction will reduce by EUR 1 billion to EUR 6.5 billion in the coming year. Materials and wages have reduced by 3% in the last 12 months. All sectors are declining, particularly residential housing, which it is estimated has declined by 60% in the last year.
The most important feature for the industry this year will be the launch of NAMA (National Asset Management Agency) which the Irish government set up to take ownership of properties (many yet to complete) from large developers who have defaulted on loans to banks. Good value and capacity are in abundance.
The construction industry will continue to suffer from the effect of the recession in 2010. Unemployment is currently running at about 18%. Construction put in place will be down about 3% this year after falling 15% in 2009 and 7% in 2008.
Residential construction, which typically leads a recovery, could increase about 4% this year after falling 14% last year after a 29% in 2008.
The non-residential segment will be down about 6% in 2010. Many segments will continue to see significant declines, but health care and education should be some of the better non-residential market segments this year.
China's foreign inward investment has been in free fall as overseas companies were hit by the global downturn and cut their spending. But increased inward investment and increased energy usage are the latest evidence that the country's economic recovery is gaining momentum.
There has also been a strong rebound in the domestic economy, fuelled by the government's stimulus package (GBP 357.6 billion), which has boosted demand for steel, cement and other materials.
Confidence in China as a top investment location is beginning to return, and we expect this to encourage foreign companies to continue their investment in China, taking advantage of its stronger economic growth compared with other countries.
The Singapore economy has resumed expansion since the 3rd quarter of last year. This greatly helped the sentiment in the property market generally, especially when the regional power house of China is registering large percentage growth figures.
The construction industry provided Singapore with some growth over the last 2 years during which at various times the overall economy was contracting. The residential market is now in robust good health and the government just introduced new measures in an attempt to cool some of the speculative pressure in the market. This improved sentiment is translating into new projects being launched and keen bidding for plots of land as they become available.
A number of big construction projects, notably the two Integrated Resorts incorporating the first two casinos to be built in Singapore, refinery expansions by Shell and Exxon Mobil and big investments in industrial plants such as the photovoltaic plant being built by REC, have been completed or are approaching completion quickly. However, with the on-going projects and the new investments being made, there is still a healthy amount of work in the market
The turbulent end of 2008 ushered in 2009 that continued briefly downwards, culminating in an overall 40% drop from the 2008 peak. Prices began to stabilize in mid-2009. This year began with the grand opening of the world's tallest building - Burj Khalifa, one of the region's most striking buildings. However, the outlook for 2010 is modest with GDP growing 2% to 4%.
Abu Dhabi will drive the growth with Dubai levelling off or contracting further. Based on this and the ongoing global conditions, the construction market in the area is likely to follow the patterns of 2009, with continued pressure on prices and lower volumes of work than experienced in pre-2009.