Singapore is 4th most expensive construction market in Asia: Survey

Singapore ranks behind Tokyo, Hong Kong and Macau in terms of costs to build.
Singapore ranks behind Tokyo, Hong Kong and Macau in terms of costs to build.PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) - Singapore is the fourth-most expensive Asian construction market to build in, as the industry deals with a shortage of skilled labour and high material costs.

Against this backdrop, tender prices here are expected to remain volatile for the rest of the year, the latest Turner & Townsend's International Construction Market Survey 2021 showed. Tender prices could rise within a range of 10 per cent to 15 per cent, which is higher than its earlier forecast range of 6 per cent to 10 per cent.

The real estate consultancy noted that construction output rose marginally by 5 per cent in the first quarter of the year compared with the fourth quarter of last year as more construction activities resumed. That said, border restrictions on South Asian migrant workers implemented in April and May have slowed construction activities and will likely affect output for the upcoming quarters.

Labour costs have thus risen due to the lack of skilled labour, with significant cost increases seen in mechanical and electrical works.

In Singapore, prices of key construction materials such as steel bars rose by 36.2 per cent, with cement rising by 6 per cent, as at June this year compared with December. This is in line with price hikes found across other global markets due to the widespread disruption to global supply chains, sustained by high demand and competition for such materials.

About $5.7 billion worth of construction contracts were awarded in the first quarter of this year, the real estate consultancy's Singapore market insight report showed. This is a marginal decline of 0.1 per cent from the previous quarter.

More than 60 per cent of these projects were from the public sector, in areas such as residential, institutional and others, as well as civil engineering projects.

Turner & Townsend expects the public sector to lead the majority of work demand for the rest of the year, even as the recent moderate increase in the supply of private homes from confirmed sites under the 2021 second half Government Land Sales (GLS) programme is likely to spur more private sector construction activity next year.

Still, the report noted that it remains unclear if more applications from investors and developers will be made for land parcels currently available under the 2021 second half GLS reserve list, especially for larger plots like the Kampong Bugis Master Development site and the Woodlands Avenue 2 white site.

In Asia, Singapore ranks behind Tokyo, Hong Kong and Macau in terms of costs to build, with an average cost of US$2,079 (S$2,830) per sq m to undertake construction.

Singapore's construction market is the 37th most expensive globally. Tokyo ranks top as the costliest city to build globally, with an average cost of US$4,001 per sq m to build. This is followed by Hong Kong at US$3,894 per sq m, and San Francisco at US$3,720 per sq m.

The Turner & Townsend survey analysed input costs, such as labour and materials, and charted the average construction cost per sq m for residential, commercial, hotels, industrial and retail buildings across 90 global markets.