CONSTRUCTION MARKETQUARTERLY UPDATE

ISSUE NO. 81 | MARCH 2018

SINGAPORE REPORT

THE NEXT CHAPTER

|SINGAPORE REPORT

MARCH 2018

1 |

In this year’s first issue of the Singapore Quarterly Report, we decided to use this page that is usually reserved for our project feature, to let you that we are excited for our next chapter of RLB Singapore history!

The boxes are finally gone. We’ve cleaned up the mess. It gives us great pleasure to announce that we have moved to a new location not too far across town.

We are now at 911 Bukit Timah Road, Level 3, Singapore 589633.

We spent the past 14 years at The Gateway in downtown Bugis. Our previous office served us well, and we made fond memories there.

This new office is a revitalised space for our colleagues as we continue to build up the whole team. As we now embark on this new chapter in 2018, we remain dedicated to full engagement in the built environment with our clients, our team, our industry counterparts and our communities.

Although we may have moved to somewhere new, our contact information on telephone and email address remain unchanged. We look forward to stay in touch with you.

We hope that you will continue to enjoy reading our publications and find them useful.

MARKET TRENDS

SINGAPORE ECONOMY

SINGAPORE REPORT | MARCH 2018

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The Singapore economy for 2017 achieved its fastest pace of growth in almost half a decade. The Ministry of Trade and Industry (MTI) announced gross domestic product (GDP) in 4Q 2017 was 3.6% year-on-year (y-o-y). Full year economic expansion achieved was 3.6%, faster than the 2.4% growth in 2016. The Purchasing Managers’ Index (PMI) - an early indicator of manufacturing activity - rose from 52.8 in December 2017 to 53.1 in January 2018. This was the highest level since December 2009 amid strong global growth. New consumer electronics releases in 2017 including mobile phone models, manufacturing output surged and helped fuel a pick-up in global demand for semiconductors and related equipment.

As the Singapore economy have performed much better than expected last year, many small and medium-sized enterprises (SMEs) are eagar to reap the gains from the improved environment. Yet, they still face several challenges which may impede their growth. Such challenges include the perennial gripes about cost and manpower, cash flow management as well as the lack of collaborative opportunities with larger local players, in particular the government-linked companies (GLCs) in particular, to seek growth overseas together.

In the property market, land deals in Singapore have been keenly contested by local and foreign developers with new price benchmarks reached last year. That has stoked a series of warnings from the government on the risk of excessive exuberance in the property market.

In the construction sector, after posting six consecutive quarters of contraction, with a -5.0% in 4Q 2017, the Building Construction Authority (BCA) reported the overall sector shrank by 8.4%, after the rescheduling of “a few major public sector infrastructure projects”. This was a reversal of the 1.9% growth back in 2016. The value of construction contracts to be awarded in 2018 is expected to stand at S$26 billion to S$31 billion, a downward revision from the initial forecast of between S$26 billion and S$35 billion.

In view of upcoming major infrastructure developments such as the Changi Airport Terminal 5 and Cross Island Line, public sector projects are expected to be the key contributor of Singapore’s construction market and lead with a contribution of S$16 billion to S$20 billion per year from years 2019 to 2022. While the persistent weakness in private sector construction activities is likely to continue this year, BCA is positive the demand in the private sector will gradually increase in the medium term due to the spill-over benefits generated by improved local economic performance and the redevelopment of collective sale sites.

For the whole of 2018, MTI expects GDP growth to moderate from 2017’s growth but remain firm. The government expects growth to come in “slightly above the middle of the forecast range”, with the manufacturing sector likely to continue growing and supporting the rest of the economy.

SINGAPORE REPORT | MARCH 2018

Based on Urban Redevelopment Authority (URA) data, overall private residential property prices in 2017 increased by 1.1%, compared with the 3.1% decline in 2016. Analysts said the recent collective sale fever has pushed up the number of transactions and private residential prices as cash-rich sellers look for replacement homes. In contrast, rental prices of private residential properties declined by 1.9% for the whole of 2017, lesser than the decline of 4.0% in 2016.

Landlords and tenants of physical retail stores continue to face challenges from e-commerce, negatively impacting the retail climate with higher operating costs, lowered retail rents and rising vacancy rates. For 2017, URA reported that prices of retail space decreased by 8.8%, compared with the decline of 5.4% in 2016, while rentals of retail space decreased by 4.7%, compared with the decline of 8.3% in 2016.

URA data showed the overall prices of office space in 2017 decreased by 2.4%, compared with the decline of 2.8% in 2016. Saville’s analysis of the office sales market found the lack of investible grade office stock from the private sector has been the restraining factor to securing more transactions. There is an overall improvement of 0.4% in 2017 for office space rents, compared with the decline of 8.2% in 2016. Co-working space is a recent rising market trend. WeWork, the largest coworking space operator in the world, leased and opened its first location in Singapore in December 2017 and is slated to introduce more co-working spaces in 2018 to 2019. As at the end of 4Q 2017, there was a total supply 597,000m2 GFA of office space in the market, lesser than the previous quarter (607,000m2 GFA). Market expert M&G Real Estate expects the local office rental growth offices to rise at 6% per annum over the next three years, driven by a medium-term Grade A supply drought.

Singapore’s private property market is seeing a steady upturn on the back of a recovering economy and job market. Year 2007 currently holds the highest record of S$11.5 billion in a single en bloc year. The last two previous waves of en bloc frenzies happened in 1997 and 2007. Last year, collective sale prices reached record-breaking levels with a total of 28 en bloc tenders, and the awarded deals were worth an estimated S$8.7 billion. Market observers projected the transaction value in 2018 will trump that of 2017. These aggressive land deals prompted the Monetary Authority of Singapore (MAS) to scrutinise bank loans for property development by developers and construction companies.

The market is seeing more commercial and mixed-use developments jumping onto the collective sales bandwagon but their transaction success rate pales in comparison to residential developments. Market observers noted that collective sales involving commercial properties tend to be more complex and time consuming than those involving residential developments. As of March 2018, there has been 14 collective sale sites sold for residential developments. No commercial collective sale sites have been sold yet.

The MAS has already warned of a potential mis-match between the private housing supply and occupation demand. The Ministry of National Development (MND) revealed that as at end 4Q 2017, developers have paid a total of S$380 million in additional stamp buyer’s stamp duty (ABSD) fees (S$200 million) and qualifying certificate (QC) charges (S$180 million) for not being able to sell all residential units in their projects within stipulated deadlines.

3 |

MARKET TRENDS

SINGAPORE PROPERTY MARKET

4 |

SINGAPORE REPORT | MARCH 2018

Last year, the construction sector was the only industry that contributed negative growth to the overall economy. It contracted by 8.4% for the whole of 2017, a reversal from the 1.9% growth in 2016. Output in the sector was primarily weighed down by the weakness in private sector construction works. Preliminary estimates by the Building and Construction Authority (BCA) showed that total construction contracts awarded in last year was S$24.5 billion, below the projected S$28 billion to S$35 billion for the year.

BCA projected the value of construction contracts awarded this year to rise to between S$26 billion and S$31 billion. Between S$16 billion and S$19 billion worth of public projects will be awarded, more than the S$15.5 billion last year. Construction demand in the private sector is projected to improve to between S$10 billion and S$12 billion this year, up from S$9 billion last year.

For the whole of 2018, the Ministry of Trade and Industry (MTI) forecasted that the performance of the construction sector is likely to remain burdened by weakness in private sector construction demand. However, there is increasing support for the industry. The government brought forward S$1.4 billion in public projects to 2018 in order to help firms ride out the economic slowdown last year. Some of the projects expected to be awarded this year include additional major contracts for infrastructure projects like the Land Transport Authority’s North-South Corridor, national water agency PUB’s Deep Tunnel Sewerage System and various healthcare facilities. The government has assured its construction contracts will remain accessible to smaller local

companies. About 80% of all the government’s construction contracts are valued below S$650,000, in which smaller local firms without a track record can participate. There are also stricter measures and practices in place to deter price-diving in public tenders by placing higher emphasis on quality factors, especially when the construction industry is in a downturn.

There will be a continued push to use manufacturing methods involving prefabrication as outlined by the Construction Industry Transformation Map (ITM) launched in October last year. Such methods use Design for Manufacturing and Assembly (DfMA) technologies, which include prefabricating parts to improve and regulate the quality of building components. The construction sector will receive funds assistance from the industry and research communities to raise the capabilities of local construction players and help them seek overseas opportunities.

Additionally, as the country’s existing infrastructure ages, the Ministry of National Development (MND) is mandating all building owners to hire qualified personnel to conduct a facade inspection every seven years so that their buildings continue to be safe and functional. Only private landed homes and temporary buildings are exempted. BCA is currently working with the industry to develop guidelines and aims to finalise the relevant legislation changes for the inspection regime by the end of the 2018.

Based on current demand and cost trends, and barring any unforseen circumstances, overall building tender prices for 2018 is anticipated to be between -1.0% and 1.0%.

MARKET TRENDS

SINGAPORE CONSTRUCTION INDUSTRY

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Global economic activity continues to firm up as the global output is estimated to have expanded by 3.7% in 2017, according to the International Monetary Fund (IMF) outlook published in January this year. The IMF revised the global growth forecasts for 2018 and 2019 upward to 3.9% to reflect the increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.

SINGAPORE REPORT | MARCH 2018

MARKET TRENDS

GLOBAL ECONOMY

tries to manage a shift from the low-wage, high-exports model of the past to a more balanced mix where stronger domestic spending plays a greater role. China’s economy still faces risks from U.S. trade protectionism policies.

The euro zone economy ended 2017 on a robust note with a 10-year high growth of 2.5% on the back of robust world trade, according to preliminary estimates released by Eurostat. This growth also reflected the past years’ efforts of the European Central Bank (ECB) to drive eurozone growth via its huge stimulus programme. The ECB revised upwards its growth estimates for the eurozone to 2.3% in 2018, up from a previous estimate of 1.8%, and it forecasts 2019’s economy to expand 1.9% (up from 1.7%).

The overall U.S. economy is healthy as it picked up in 2017, even though the growth slowed at year’s end. The Commerce Department reported the economy grew 2.3% in 2017, ahead of the 1.5% in the previous year. It was also below the Trump Administration’s target of 3.0% as it continues to take protectionist steps on trade. The US Federal Reserve raised interest rates five times within 2017, and is planning to raise rates thrice more in 2018. and twice in 2019. This highlights the central bank’s growing confidence that tax cuts and government spending will boost the economy and inflation and encourage more aggressive future tightening.

As the world’s second-biggest economy, China’s economic growth exceeded the government target of 6.5% and grew 6.9% in 2017 on the back of strong consumer

spending and exports amid its economic restructuring. Besides slower local government infrastructure spending, property investments and construction have been slowing down as more cities try to curb surging house prices. Although the Chinese government targets a similar 6.5% economic expansion for 2018, the economy is expected to gradually slowdown as President Xi Jin PIng

Source: IMF

6 |

Data Sources: BCA and RLB

Variances between the RLB and the BCA Tender Price index arise from differences in the index derivation methodology, the basket

of items and weightages used for each index and the variety of building projects utilised. The index basket here excludes piling works

and Mechanical & Electrical services.

Base Year 2010 = 100

* Average indices as at 3rd Quarter 2017

Note:

Data Source: BCA

Annual change 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RLB TPI -3.6% 106.2 123.2 100.2 100.0 103.1 105.7 110.5 112.0 110.2 105.3 101.5

BCA TPI -1.3% 107.1 119.9 101.3 100.0 99.7 99.8 104.6 106.8 104.0 98.0 96.7

BUILDING TENDER PRICE INDICES

Annual change 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

HDB Flats -3.1% 103.6 124.3 107.2 100.0 93.0 92.0 97.8 99.8 96.0 85.8 83.2

PrivateNon-Landed

-2.3% 110.9 120.0 101.9 100.0 101.7 103.5 108.0 110.1 107.6 104.7 102.3

CommercialOffices

-2.1% 110.5 118.4 102.0 100.0 102.5 103.5 106.3 107.0 103.7 99.9 97.8

MARCH 2018|SINGAPORE REPORT

80

90

100

110

120

130

TENDER PRICE TRENDS

BCA TENDER PRICE INDICES

80

90

100

110

120

130

500

1,000

1,500

2,000

2,500

3,000

3,500

4,500

5,000

5,500

6,000

6,500

7,000

7,500

USD/TonneUSD/Tonne

550

600

650

700

750

800

850

CRUDE OIL PRICES

Data Source: BCA

Data Source: IndexMundi

Note: Crude Oil Prices above are expressed as monthly average prices of UK Brent, Dubai and WTI oil classifications.

7 |

STEEL REINFORCEMENT (16 - 32MM HIGH TENSILE) SUPPLY PRICES

METAL PRICES

Average 4Q 17 / 3Q 17 change

Feb17

Mar17

Apr17

May17

Jun17

Jul17

Aug17

Sep17

Oct17

Nov17

Dec17

Jan18

Feb18

Crude Oil +16.9% 54 51 52 50 46 48 50 53 55 60 61 66 63

US

D/B

arr

el

SG

D/T

on

ne

US

D/T

on

ne

LHS: Left Hand Side y-axisRHS: Right Hand Side y-axis

SINGAPORE REPORT | MARCH 2018

COMMODITY PRICE TRENDS

Average 4Q 17 / 3Q 17 change

Feb17

Mar17

Apr17

May17

Jun17

Jul17

Aug17

Sep17

Oct17

Nov17

Dec17

Jan18

Feb18P

Steel REO 6.1% 648 643 635 610 608 644 752 776 761 760 783 790 784

Average 4Q 17 / 3Q 17 change

Feb17

Mar 17

Apr17

May17

Jun17

Jul17

Aug17

Sep17

Oct17

Nov17

Dec17

Jan18

Feb18

Copper 7.3% 5941 5821 5697 5591 5699 5678 6477 6582 6796 6825 6800 7079 7001

Aluminium 4.4% 1856 1901 1930 1913 1886 1903 2029 2100 2130 2100 2070 2214 2184

Copper (LHS)

Aluminium (RHS)

p: preliminary

Data Source: London Metal Exchange (LME)

45

50

55

60

65

70

50.0

60.0

70.0

80.0

90.0

100.0

0.0

20.0

40.0

60.0

80.0

100.0

Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 17 Feb 17P

S$/m3S$/Tonne

BASIC CONSTRUCTION MATERIALS

Data Source: BCA

Prices of rebar other than 16-32mm dimensions may be subject to surcharge.Prices of granite and concreting sand exclude local delivery charges to concrete batching plants.The market prices of rebar (without cut & bend) are based on fi xed price supply contracts with contract period 6 months or less.The market prices of ready mixed concrete are based on contracts with non-fi xed price, fi xed price and market retail price for Grade 40 Pump.

Note:

CURRENCYEXCHANGE RATES

Data Sources: IMF, Oanda

Note: Exchange rates above are expressed in terms of currency units per US Dollar; averaged monthly from daily unit rates.

8 |

CURRENCY UNITS PER USD

UNIT OCT 17 NOV 17 DEC 17 JAN 18 FEB 18 MAR 18P

Singapore Dollar $ SGD 1 1.36 1.36 1.35 1.32 1.32 1.31

Euro € EUR 1 0.85 0.85 0.84 0.82 0.81 0.81

U.K. Pound Sterling ₤ GBP 1 0.76 0.76 0.75 0.72 0.72 0.72

Australian Dollar $ AUD 1 1.28 1.31 1.31 1.26 1.27 1.29

Chinese Yuan ¥ CNY 1 6.62 6.63 6.59 6.43 6.31 6.32

Malaysian Ringgit RM MYR 1 4.23 4.18 4.08 3.96 3.92 3.90

Japanese Yen ¥ JPY 100 1.13 1.13 1.13 1.11 1.08 1.06

Myanmar Kyat K MMK 100 13.80 13.75 13.72 13.55 13.41 13.48

Indonesian Rupiah Rp IDR 1000 13.53 13.53 13.56 13.38 13.59 13.76

Vietnamese Dong ₫ VND 1000 22.99 22.94 22.82 22.72 22.77 22.82

Average 4Q17 / 3Q17 change

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul17

Aug 17

Sep17

Oct17

Nov 17

Dec17

Jan18

Feb 18P

Conc. Sand 0.0% 16.7 17.0 16.3 16.9 16.6 17.0 18.0 17.8 17.4 17.5 17.9 18.0 18.0

Granite (20mm) 0.4% 15.0 15.1 15.7 16.1 16.3 16.4 16.6 16.6 16.8 16.7 16.3 16.6 16.6

Cement 0.2% 76.3 75.9 76.5 76.2 76.5 76.0 74.8 75.3 75.8 75.4 75.4 76.1 76.3

Ready Mixed Conc. 1.3% 81.1 80.7 80.3 80.2 80.8 81.2 81.3 82.2 82.2 82.3 83.3 84.2 84.2

SINGAPORE REPORT | MARCH 2018

MATERIAL PRICE TRENDS

p: preliminaryLHS: Left Hand Side y-axis

RHS: Right Hand Side y-axis

Granite (LHS)Concreting Sand (LHS)

Cement (LHS)

Ready-Mixed Concrete (RHS)

p: preliminary

LOCALCONSTRUCTION

PRICES

Notes:CFA - Construction Floor Area is the area of all building enclosed covered spaces measured to the outside face of the external walls including covered basement and above ground car park areas.

GFA - Gross Floor Area is the area of building enclosed covered spaces excluding car park and driveway areas calcu- lated for purposes of planning submissions.

All Singapore construction prices stated herein are as at 4th Quarter 2017, and include a general allowance for founda-tion, carpark and external works. The price ranges herein are indicative and due consideration should be given to the impact of varying design, specifications, size, location and nature of each project when utilising this information. Prices described here may not fully reflect the extent of current market forces and tendering conditions on any specific project.

Exclusions:• Land cost • Legal and professional fees • Development charges • Authority fees • Finance costs • Loose furniture, fit-tings and works of art (unless otherwise stated) • Tenancy work • Site infrastructure work • Diversion of existing services • Green Mark cost premiums • Resident site staff cost • Models and prototypes • Future cost escalation • Goods and Services Tax

Disclaimer: While Rider Levett Bucknall LLP (“RLB”) has endeavoured to ensure the accuracy of the information and materials in this report (the “Materials”), it does not warrant its accuracy, adequacy, completeness or reasonableness and expressly disclaims liability for any errors in, or omissions therefrom. RLB shall not be liable for any damage, loss or expense whatsoever arising out of or in connection with the use or reliance on the Materials. The Materials are pro-vided for general information only. Professional advice should be obtained for your particular factual situation before making any decision. The Materials may not, in any medium, be reproduced, published, adapted, altered or otherwise used in whole or in part in any manner without the prior written consent of RLB.

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DEVELOPMENT TYPE COST PER CFA

S$/m2

LANDED RESIDENTIAL

Terrace House 2,300 – 2,700

Semi-detached House 2,400 – 3,250

Detached House 3,400 – 5,600

Cluster Housing 2,400 – 2,950

INSTITUTIONAL

Institution of Higher Learning

2,750 – 3,450

Medical Institution 4,000 – 5,450

INDUSTRIAL

Single Storey Warehouse 1,100 – 1,600

Light Industrial Building 1,200 – 1,700

Heavy Industrial Building 1,450 – 2,000

CAR PARK

Above Grade Car Park 700 – 1,400

Basement Car Park 1,500 – 2,250

HEALTHCARE

Nursing Home 1,700 – 3,150

Medical Centre 2,900 – 3,300

Hospital 3,400 – 3,800

SINGAPORE REPORT | MARCH 2018

DEVELOPMENT TYPE COST PER CFA COST PER GFA

S$/m2 S$/m2

OFFICE

Standard (outside CBD) 2,000 – 3,200 2,450 – 4,100

Standard (within CBD) 2,050 – 3,300 2,950 – 4,350

Prestige (within CBD) 2,950 – 4,150 4,100 – 5,400

HOTEL (INCLUDING FF&E)

Serviced Apartment 3,050 – 3,550 4,050 – 4,650

Three Star 3,250 – 3,650 4,050 – 4,750

Four Star 3,550 – 4,400 4,650 – 5,800

Five Star 4,250 – 5,500 5,400 – 7,300

RETAIL

Medium Quality 2,000 – 2,850 3,000 – 3,600

Good Quality 2,950 – 3,350 3,700 – 4,400

CONDOMINIUM

Medium Quality Condominium

1,950 – 2,600 2,600 – 3,350

Good Quality Condominium

2,500 – 3,150 3,350 – 4,300

Luxury Quality Condominium

3,200 – 4,350 4,350 – 5,900

Cover: Night view of Singapore’s Downtown Core

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RLB’s global expertise and significant project experience provides comprehensive services and solutions to the development and construction of the built environment, extending to building and civil infrastructure, commercial, residential and hospitality buildings, healthcare, industrial and civil engineering projects. As a multi-disciplinary group, RLB offers a full range of services required by clients in the property and construction industry, ranging from cost consultancy and quantity surveying, project management, advisory services and market research.

RLB Research’s expertise in economic and market studies, industry participation and research publications position us as the choice consultant for advice on construction cost trends and market updates for the regional construction markets.

The extensive range of professional consultancy provided by RLB covers the following core services:

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VIETNAM

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MYANMAR

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