Residential project pipeline to boost construction industry 3.2% in 2019
Five more BTO projects are scheduled for launch by the end of the year.
Singapore’s residential and non-residential buildings sector is expected to edged up 3.2% in 2019 and 2.3% in 2020, thanks to strong pipeline of buildings currently under planning and construction coming through from 2018, a report by Fitch Solutions revealed.
In particular, the faster pace of growth is attributed to the residential buildings sector, which the firm forecasts to grow 3.2% and 1.5% in real terms, in 2019 and 2020, respectively, up from -0.7% and -0.8% previously.
“In the public residential sector, the government has been consistently launching new build-to-order (BTO) projects, with six projects already launched in H1 2019 and another five more scheduled for launch by the end of the year,” Fitch Solutions said.
In the private residential sector, following 11 consecutive quarters of decline in the number of total number of residential units planned and under construction, there was a rebound in Q4 2017.
With planned projects, especially those in 2018, expected to commence construction in 2019, the residential sector is also forecasted to receive a boost in growth in the coming months. A similar trend can be observed for the non-residential sector, with a slight rebound in the pipeline of office, industrial and retail space noted since Q4 2017, the firm noted.
Meanwhile for 2020 on the other hand, Fitch Solutions has made a downward revision for growth, from 2.6% to 2.3%, due to the slight drop in the number of newly planned residential units observed in Q1 2019, as well as imposed property cooling measures taking effect.
“In 2018, the government raised the Additional Buyer’s Stamp Duty (ABSD) and tightened loan-to-value (LTV) limits on residential property purchases, and we anticipate a drop in demand as a result of these measures, which will slow down the pace of the rollout of property development projects from 2019 onwards,” Fitch Solutions said.
In terms of the total value of contracts awarded per month, an estimated $9b worth of residential building contracts, from both the private and public sectors, were awarded in 2018. This is in contrast to the $4.8b worth of commercial and industrial contracts awarded in the same period. According to Fitch Solutions, this data points to stronger construction activity within the residential buildings sector over the next two years, supporting the firm’s upward revisions for the country’s residential buildings sector.
“Risks of growth are heavily weighed to the downside, due the ongoing US-China trade dispute contributing to external headwinds to growth of Singapore’s economy, as well as uncertainty in global markets in general,” Fitch Solutions said. “A recession in the US will have global implications, including a slowdown in trade activity which will affect the growth of the Singapore economy. Hence, fears of an impending slowdown may further suppress demand for residential build.”
The report further highlighted that an early indication of a possible slowdown in growth of the residential buildings sector can be seen from data provided by the Monetary Authority of Singapore (MAS).
Although the total amount of housing and bridging loans, recorded in domestic banking units, had been steadily rising since January 2016, growth of these loans had entered negative territory since January 2019.
“This is a possible signal that demand for housing is waning, a phenomenon likely linked to the effects of property cooling measures, as well as fears of recession,” the firm concluded.