Strengthening Cornerstones for Tougher Times

Despite the sovereign debt issues in the Eurozone and the weak US labour market, the Ministry of Trade and Industry (MTI) expects the Singapore economy to grow by one to three per cent in 2012. The construction industry, notwithstanding its marginal 0.3 per cent growth in the third quarter of 2011, still remains a significant contributor to the Singapore economy.  Meanwhile, the real estate services segment grew by 0.9 per cent, on a sequential basis.

The State of the Construction Industry

Domestic economic activity in Singapore grew by 6.1 per cent in the first three quarters of 2011. This was largely supported by the strong performance by the biomedical sector – the rest of the economy, including the construction sector, remained weak.

The repercussions of the supply chain disruptions brought about by the Japan earthquake have mostly dissipated, yet the withdrawal of global demand, the deterioration of consumer confidence and the weakening of global businesses steered towards the further slowing of domestic economic activity.

The third quarter saw the construction sector marginally grow 0.3 per cent on a year-on-year basis, tempering the 1.5 per cent growth in the second quarter. On a sequential basis, the end of the third quarter of 2011 saw the construction sector register a decline of 11.8 per cent on quarter SAAR (seasonally adjusted annualised rate) after expanding by 13.3 per cent in the second quarter. Residential construction continued to contract, while the non-residential construction segment saw a decline, pulled down by the decrease in public sector works.

Despite this, the construction industry remains a significant contributor to the Singapore economy, providing $3,240.7 million in the third quarter of 2011 alone.

The Rise in Real Estate and Rental Prices

Property prices in Singapore are still increasing. However, the 3rd quarter of 2011 was the 8th consecutive quarter which saw the rate of increase in private housing prices slow down. Prices of private residential properties rose 2.2 per cent in the first quarter, 2.0 per cent in the second quarter and only 1.3 per cent in the third quarter. Office properties rose 4.9 per cent, 3.6 per cent and 3.7 per cent in the first, second and third quarter respectively. Meanwhile, shop property prices had an increase of 0.5 per cent, 1.1 per cent and 3.4 per cent over the first, second and third quarter while all industrial properties rose 8.3 per cent, 5.5 per cent and 6.9 per cent in the first, second and third quarter respectively.

Rentals generally increased through the first three quarters as well. In the first quarter, rentals of private residential, office, shop and industrial properties increased by 1.2 per cent, 5.4 per cent, 0.8 per cent and 6.3 per cent respectively. In the second and third quarter, rentals continued to moderate, with the rentals of private residential, office, shop and industrial properties increasing by 0.8 per cent, 0.9 per cent, 0.5 per cent and 2.4 per cent in the third quarter.

Additional Cooling Measures

Due to fears of excessive investment in the Singapore property market, the government implemented additional cooling measures.

On 13 January 2011, the government informed of the extension of the holding period for the imposition of Seller’s Stamp Duty (SSD) on residential properties from three years to four years. New rates will be enforced  on residential properties which are acquired from 14 January 2011 and sold within four years from the date of purchase. For properties with a holding period of one year, the new SSD rate will be 16 per cent of the price or market value, whichever is higher. For properties with a holding period of two, three and four years, the new SSD rate will be 12 per cent, 8 per cent and 4 per cent respectively, of the price or market value, whichever is higher.

In addition, the government lowered the Loan-to-Value (LTV) ratios on second mortgages further to 60 per cent of the appraised value of the property.

Starting 8 December 2011, foreigners and corporate entities were required to pay an additional 10 per cent Additional Buyers Stamp Duty (ABSD), on top of the existing buyer’s stamp duty on property purchases, and valued at the following rates: one per cent on the first S$180,000 of purchase consideration or market value of the property, whichever is higher; two percent on the next S$180,000; and three per cent for the remainder. A further levy imposed will be three per cent for Permanent Residents (PRs) who are buying their second home, and for Singaporeans purchasing their third residential property. The move aims to promote a sustainable property market.

Building, Architectural and Design Achievements

Singapore’s architectural and design industry reaped numerous awards in 2011 in the local and international arena. Seven restoration projects received the Architectural Heritage Awards from the Urban Redevelopment Authority (URA) while two designers and ten designs received the President’s Design Award. The Architectural Heritage Awards honours owners, professionals and contractors who have gone and beyond their duty in restoring heritage buildings. The President’s Design Awards, being the highest accolade conferred to individuals or organisations in the field of design, recognises the achievements and contributions of Singapore-based designers.

The Building and Construction Authority (BCA) has also been awarded the Regional Leadership Award, one of the six World Green Building Council Government Leadership Awards given out, for its efforts in leading Singapore’s construction industry towards a more sustainable development.