Public sector projects to drive bulk of construction sector’s recovery in 2021

SINGAPORE: Construction demand is expected to make a moderate recovery in 2021, largely supported by public sector demand, with a number of “major” infrastructure projects to be awarded this year, the Building and Construction Authority (BCA) said on Monday (Jan 18).

BCA projected that S$23 billion to S$28 billion worth of construction contracts will be awarded in 2021.

That marks an improvement from the estimated S$21.3 billion awarded in 2020, a sum that fell within projections that had been revised downwards in the wake of the COVID-19 pandemic.

WATCH: Construction demand to plunge this year after COVID-19 stalls projects

Speaking at a seminar on the property sector’s prospects on the same day, National Development Minister Desmond Lee said the Government will contribute about 65 per cent, or between S$15 billion to S$18 billion, of the overall construction demand this year.

“This is higher than the S$13.2 billion worth of public sector projects in 2020.

“Public sector demand in 2021 will be driven by major public housing and infrastructure projects, such as (the Land Transport Authority’s) Integrated Transport Hub at Jurong East, the Jurong Region Line and the Cross Island Line,” said Mr Lee.

He added that there will be around S$6 billion worth of smaller public sector projects, which are less than S$100 million in contract value, such as cycling paths and upgrading works.

“This is comparable with the annual average pre-COVID, and will benefit our smaller and mid-sized contractors,” he said.

But on the private sector construction side, demand is not expected to return to pre-COVID-19 levels yet, as “investors are likely to remain cautious”, Mr Lee added.

Demand from this sector is projected to fall within S$8 billion to S$10 billion in 2021, with the bulk of it coming from the development of remaining en bloc residential sites and major retrofitting of commercial developments, among others.

STRONGER RECOVERY MAY BE ON THE HORIZON

The minister said authorities expect a “sustained recovery of construction demand over the next five years”, with early forecasts that construction demand may further strengthen to S$25 billion to S$32 billion between 2022 and 2025.

“This forecast has not taken into consideration potential new contracts for Changi Airport Terminal 5 and the expansion of the two Integrated Resorts, as these project timelines are still under review due to disruptions from COVID-19,” he added.

In the medium term, the construction sector’s growth will be supported by public sector developments, such as public housing, transport and healthcare infrastructure, said Mr Lee.

These projects will contribute S$14 billion to S$18 billion each year in this period, BCA added.

But the sector is still facing “significant headwinds”, especially with a tight manpower situation amid the challenges of bringing in new foreign workers.

Acknowledging such concerns, Mr Lee said authorities have been working with industry partners to ease the labour crunch.

READ: Migrant workers stuck overseas amid border restrictions; contractors struggle with labour crunch

WATCH: Construction firms grapple with manpower, cash flow issues as go-ahead given to restart work

He cited how the manpower ministry has worked with the country’s contractors association to “facilitate matching of workers in Singapore with new employers” through a manpower exchange platform.

Since last December, entry restrictions have also been eased to allow more existing and new work permit holders to enter Singapore. 

“This was not a straightforward endeavour, given the global pandemic situation,” Mr Lee said.

“It continues to require close coordination between agencies … to ensure that we can bring in sufficient workers to alleviate the manpower shortages faced by firms, and yet to do so in a safe way, with sufficient testing and quarantine facilities, in order to protect public health.

“We will continue to monitor the situation and adjust our measures as necessary to support the sector,” he said.

READ: Authorities ease entry restrictions for new foreign workers to address labour crunch

Mr Lee, however, also said that the pandemic has emphasised the “need to build in more resilience into the system and significantly reduce our over-reliance on foreign guest workers”.

To that end, authorities will continue to push the adoption of digital technologies.

“We are also looking at further strengthening our policies to facilitate transformation and to support firms. We will announce more details during the Budget season this year,” he added.

PROPERTY MARKET OUTLOOK

Mr Lee said the property market has remained largely resilient, even amid the COVID-19 pandemic and its fallout.

He noted that the pace of increase in private housing prices has gathered momentum, developers’ sales at new launches have been “robust” and there has been healthy bidding interest in land tenders.

But Mr Lee warned that the property market is “not insulated” from global economic uncertainties, “nor setbacks to the recovery in the domestic labour market”.

He urged developers to remain prudent in their land bidding and households to exercise caution in their purchasing decisions, “given the uncertain economic outlook and possible rise in interest rates”.

“The Government is monitoring the developments in the property market very closely. We will adjust our policies if necessary to maintain a stable and sustainable property market for all Singaporeans,” he said.