Govt defers projects worth $1.7b

July 23, 2008
Govt defers projects worth $1.7b
Move to ease pressure on building costs
By Joyce Teo, Property Correspondent

THE Government is deferring another $1.7 billion of public sector
construction projects to ease pressure on red-hot building costs in
the next two years.

This is the third time since November that public projects have been
postponed amid high demand for building contractors and materials.

A total of $4.7 billion of public sector projects will now be pushed
back to 2010 and beyond, the Building and Construction Authority
(BCA) said in a statement.

'That's good news,' said the chief executive of property firm
Overseas Union Enterprise, Mr Thio Gim Hock. 'Construction costs have
more than doubled in the past year. It's hard to find contractors to
bid for a job. When I tender, a lot of them decline because they are
too busy.'

The latest move means projects such as the Jurong General Hospital
will be deferred to 2010, although the hospital will still be ready
and open as scheduled by 2015.

Other delayed projects include less urgent improvement works, but
public housing and upgrading programmes will not be affected.

Public projects put on hold
Some of the $1.7 billion worth of projects to be postponed:

The move will allow construction resources to be used to ensure the
timely delivery of big projects such as the integrated resorts,
Marina Bay Financial Centre and the Downtown MRT line. Most should be
finished by late next year.

The BCA also said that the resources freed up then can be used later
for the deferred projects, ensuring a better spread of construction
resources beyond next year.

Market experts said on average, costs have risen 20 to 35 per cent in
the past year.

Mr Seah Choo Meng, executive chairman of construction consultancy
Davis Langdon & Seah, was upbeat about the latest move. 'It will not
bring costs down but it will lessen the pressure on existing
resources.'

Singapore could now be among the world's most expensive nations in
terms of construction costs, though this is not likely to last, said
Mr Jackson Yap, CEO of developer cum construction firm United
Engineers.

The total value of construction projects here is forecast at $23
billion to $27 billion this year, compared to $24.5 billion last
year, and is set to stay high next year, BCA said. It is a far cry
from 2003 and 2004, when the figure was just $10 billion.

Last November, the Government took what was then a rare step of
deferring $2 billion worth of projects. Then in February, it deferred
another $1 billion worth of projects.

Dr Chua Hak Bin, Asian strategist at Deutsche Bank Private Wealth
Management, is not convinced the latest deferment is needed as
building growth has eased.

'Construction orders will likely continue coming off, given a
softening residential and commercial property market,' he said,
adding that the Government may need to consider bringing forward
deferred projects in a slowdown.

Some private projects, particularly residential, may also be delayed,
said Mr Seah. 'While this year's rate of escalation in construction
costs is expected to be in the double digits, it may be affected by
the potentially weaker economic outlook in the region.'