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Linesight’s Commodity Report sees material prices for Singapore’s construction sector to stay at record high levels

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Linesight, a global construction consultancy firm, sees construction commodity prices in Singapore to remain at record high levels in 2022, as the  construction sector deals with inflation, high material costs, and shortage of skilled labour.  By the end of this year, Linesight expects that real construction output will surpass its pre pandemic level. The findings are part of Linesight’s 2021 fourth-quarter Commodity Report  and price forecast. 

Metal prices, which include copper, steel rebar, and flat steel are expected to ease slightly  quarter-to-quarter between Q4 2021 and Q1 2022. Owing to higher prices in 2021,  construction companies working on Housing and Development Board (HDB) projects have  been given more support in the form of protected prices for steel, but an improvement in  the global supply-demand balance will support a steady easing of prices in 2022.  

Copper prices spiked at a 50.1% year-on-year increase between 2020 and 2021 and will  remain relatively high moving into 2022 albeit is expected to ease somewhat at a 2.2%  reduction from Q4 2021 to Q1 2022, assuming a recovery in production levels and a  normalisation of the supply chain. On the other hand, prices of cement concrete, lumber,  bricks, and plasterboard are expected to increase marginally from Q4 2021 to Q1 2022 due  to increasing raw material and conveyance costs.  

Lumber prices in Singapore continued to rise over Q4 2021, and although upward pressures  will ease, the ongoing recovery in residential construction will keep prices relatively high in  the coming quarters.  

Michael Murphy, Director at Linesight Singapore, said: “Building material prices have soared  in 2021 and it will stay at high levels in 2022. It will take at least another year, which is in  early 2023, before we see prices of building materials stabilises to pre-COVID levels. This  means that new construction and renovation projects – be it commercial or residential – will  remain higher than those experienced pre-2020. A big reason building material cost more  these days is that supply chains were disrupted during the pandemic. Those supply chains  now need to catch up with demand and we are seeing concerted effort by stakeholders – material producers, port operators, transporters, and government agencies – to clear the  backlog of supplies. Once that happens, the cost of building material could start to decline.” 

Real construction output is expected to reach US$18.4 billion in 2022, and US$19.4 billion in  2023, a year-on-year increase of 15.4% and 5.6% respectively. Meanwhile, Singapore was  ranked 14th globally in terms of ease of doing business, demonstrating a conducive regulatory  environment for business operations. 

The price for metal, lumber, and other building materials rose sharply in 2021, affecting most  international cities across Asia Pacific, and the record high costs will stay for the rest of 2022. 

To read the full report, you can access it here 

Top 3 Most Expensive Cities for Construction in Asia

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Singapore remains the third most expensive Asian city to build in, after Hong Kong and Macau, according to the International Construction Costs Index published today by Arcadis, the leading global Design & Consultancy firm for natural and built assets. However, Singapore moved down 5 positions on the global ranking from last year, making it the fifteenth-most expensive city in the world to build in.

The annual Arcadis index, which analyzes the relative cost of construction across 44 major cities, finds that world cities, including New York and Hong Kong, continue to be some of the most expensive locations in the world in which to build, but a slowdown in the global economy led by China and in resource economies, such as Brazil and Saudi Arabia, points to wider changes affecting the world’s construction markets.

Singapore’s construction market has seen continuous correction since 2014, caused by over-supply and a slowing economy. This year’s output forecast is currently estimated to be between US$ 27bn and US$32bn, representing a stable market after a steep correction. Sustained workload in the public sector, such as public housing and civil engineering, has supported the industry during the correction. As a result, prices have remained broadly stable.

Tim Risbridger, Country Head for Singapore commented: “With Singapore government’s continued investment in infrastructure through projects such as Changi East Development, PUB’s Deep Tunnel Sewerage System (DTSS) and Singapore to Kuala Lumpur High Speed Rail, the construction industry in Singapore will remain positive with a forecast output of 2% increment per year. However, it is not without challenges. Among them, a shortage in both labor and expertise could potentially hinder productivity if not being addressed effectively. We believe investment in technology and initiatives which will increase industry productivity, are essential in order to meet the challenges in the coming years.”

 

The Asian cities ranking in Arcadis’ International Construction Costs Index are below:

Asia Ranking World Ranking City
1 2 Hong Kong
2 5 Macau
3 15 Singapore
4 17 Tokyo
5 21 Seoul
6 27 Brunei
7 35 Shanghai
8 38 Manila
9 39 Bangkok
10 40 Taipei
11 41 Ho Chi Minh
12 42 Jakarta
13 43 Kuala Lumpur
14 44 Bangalore

Whilst economic growth levels in emerging Asian economies such as Malaysia, Indonesia and Philippines are way in excess of the developed world, growth rates in established hubs such as Hong Kong and Singapore are similar to those in North America and European cities. Growth rates in many Asian construction markets have eased significantly over the past 18 months mainly due to the peak in commercial and residential development rates. Looking forward, expansion at around 5%-7% per year is the best prospect for many construction markets in Asia.

Alan Hearn, Head of Buildings Solutions, Asia commented: “The future of the construction industry in Asia is looking optimistic. However, we believe that the construction industry drivers for the future will change. Four out of 10 highest value construction projects in 2017 are located in Asia. Among them are One Belt One Road (OBOR) initiatives and the Delhi Mumbai Industrial Corridor. Mega projects like these are mainly funded by public-private partnership (PPP) and will continue to fuel the development of the construction industry in Asia.”

Singapore ranks 10th most expensive City for construction

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– Hong Kong is most expensive city in Asia for construction

– Ho Chi Minh City, Kuala Lumpur, Bangkok, Bangalore and Taipei among world’s cheapest cities for construction

Hong Kong is the most expensive Asian city to build in, followed by Macau and Singapore according to the International Construction Costs Index published today by Arcadis, the leading global Design & Consultancy firm for natural and built assets. Hong Kong trails behind New York and London, the top two most expensive cities in the global ranking.

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

However, this price inflation comes at a cost, with the viability of important 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.

Meanwhile, throughout 2015, every construction market worldwide 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, commented: “When it comes to development, the world’s major financial centers have always commanded a substantial premium. However, the sheer scale of demand-driven price increases this year in the likes of New York, London and Hong Kong has been remarkable. Add to this the recent global currency shifts and it is plain to see why building in these locations can cost up to sixty percent more than many European cities. The problem is that rapid inflation may soon see investors and even public sector bodies shut out as prices continue to spiral.”

ranking in Arcadis’ International Construction Cost Index are below:

Asia Ranking Global Ranking Market
1 3 Hong Kong
2 5 Macau
3 10 Singapore
4 19 Tokyo
5 20 Seoul
6 27 Shanghai
7 29 Brunei
8 30 Manila
9 35 Jakarta
10 40 Ho Chi Minh City
11 41 Kuala Lumpur
12 42 Bangkok
13 43 Bangalore
14 44 Taipei

Alan Hearn continued: “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.”

The full report can be downloaded here: arcad.is/ICC2015