CONSTRUCTION INDUSTRY

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CONSTRUCTION INDUSTRY

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(Use of sustainable alternative materials): **

29.

Mdm Cynthia Phua asked the Minister for National Development (a) if he will provide an update on (i) the use of sustainable alternative materials in the construction industry and (ii) the cost of construction materials in view of increasing inflation rates and rising oil prices; and (b) how will the high material and labour cost impact on (i) HDB’s upcoming building programmes and the prices of flats; and (ii) other Government development projects.

Mr Mah Bow Tan: Mdm Phua has raised several issues in her question. Let me first deal with the issues relating to construction cost before I update her on the use of sustainable construction materials in the industry.

Singapore, like other fast growing countries in the world, is facing rising construction costs. BCA’s Building Tender Price Index(2), which tracks mainly manpower and equipment costs, rose by 19% in 2007, and by another 4% in the first quarter of 2008. In terms of overall construction cost, feedback from leading Quantity Surveyor firms indicates that the increase was about 20% to 30% in 2007, and about 3%-5% in the first quarter of 2008.

The sharp increase in construction cost is driven mainly by the high demand for construction resources and materials worldwide, and exacerbated by the surge in fuel prices. For example, the price of steel bars has risen by 85% since June last year. Concrete now costs about 18% more, year-on-year.

The Government has implemented several measures to ease the tight resource supply situation. MOM has relaxed the construction sector dependency ratio from 1:5 to 1:7 and raised the S-pass quota from 15% to 25%. Experienced foreign workers are also exempted from the Man-Year-Entitlement requirement. BCA is also working closely with the industry to expand its contracting capacity, including bringing in contracting resources from overseas. For a start, BCA has organised two joint-industry trips to China.

To help moderate construction demand, the Government had earlier deferred $3 billion worth of public sector construction projects to after 2009. This month, public agencies have identified another $1.7 billion worth of projects for deferment. This will bring the total value of projects that the Government is deferring to $4.7 billion. However, projects that are essential to meet Singapore’s economic and social needs, such as key infrastructural development, will proceed as planned. We will continue to monitor the situation closely and work with the key industry stakeholders such as developers, builders and quantity surveyors to mitigate the cost increase as much as possible.

Mdm Phua asked about the impact of rising construction costs on HDB’s building programme and the prices of flats. As new HDB flats prices are not based on cost, they will not be directly affected by the construction cost increases. New flats will continue to be priced at a discount to their equivalent market prices, so that buyers enjoy a generous

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subsidy. As I had mentioned earlier, overall construction costs had gone up by 20% to 30% in 2007. In comparison, new flat prices had increased by a slower pace, in tandem with the prevailing market trends.

For example, comparing two BTO projects next to each other in Sengkang, the project launched in November 2007 was on average about 14% higher than the one launched a year earlier in November 2006.

Nevertheless, the construction cost increase poses a strain on HDB’s budget for new building projects. HDB has already implemented various measures to mitigate the extent of cost increases as far as possible. For example, HDB is stepping up overseas promotional efforts to attract more foreign contractors to participate in HDB tenders. HDB also purchases cement and sand in bulk to cushion HDB contractors against price increases of these raw materials.

Mdm Phua also asked about the use of sustainable materials in construction. “Sustainable construction” is about the efficient use of materials. It is an important thrust to support the larger goal of sustainable development, and also a means to help manage overall construction cost. “Sustainable construction” requires the adoption of building designs and construction methods that optimise material usage, and enable the use of recycled materials, as well as materials that have sustainable supplies.

This concept is relatively new in Singapore, but we have made progress. For example, the use of dry partition wall systems, which can help builders save on materials compared to conventional concrete or internal brick walls, is becoming more popular. HDB has also recently adopted such systems for the conversion of some rental flats.

Sustainable construction methods also include prefab construction using structural steel and pre-cast concrete. While steel prices have risen considerably, there are savings on productivity, manpower, materials and construction time which could offset the higher upfront costs. Prefab construction can potentially offer a better construction solution for developers and builders, and industry stakeholders should weigh the pros and cons to decide if it is a viable option for certain types of projects such as commercial buildings.

BCA is also advocating more efficient concrete design to reduce concrete usage, and promoting the use of recycled materials in construction. To facilitate the use of recycled materials, a new Singapore Standard was launched to allow the safe and appropriate use of manufactured and recycled aggregates in place of natural aggregates in concrete production. In addition, BCA is working with demolition contractors to encourage the sorting of demolition waste and looking into the accreditation of recyclers to raise the standard of the industry.

(2) BCA’s TPI tracks mainly manpower and equipment cost, and excludes piling, M&E costs, etc.