Despite the sluggish global economy in 2014 and the slow pace of recovery, Singapore’s economy is expected to grow between 2.5 to 3.5 per cent in 2014. Growth of 2 to 4 per cent is projected for 2015, according to the Ministry of Trade and Industry (MTI), as the global economy is expected to strengthen modestly. However, the slow pace of global economic recovery has led the local business outlook to score the lowest score in two years on the Business Optimism Index (BOI) with a score of +1.11. Regardless of the BOI score, Asia, excluding Japan is expected to grow steadily in 2015. The Monetary Authority of Singapore (MAS) announced in a statement on 28 January that it will adjust its monetary policy and let the Singapore dollar appreciate at a slower rate. This led to an immediate weakening of the Singapore dollar against currencies such as the US dollar, which in turn is expected to ease some pressure on Singapore exporters.

Singapore’s Construction Industry

The Singapore economy grew in the first three quarters of 2014 by 4.8 per cent, 2.3 per cent and 2.8 per cent respectively on a year-on-year basis. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy grew by 3.1 per cent in the third quarter after a 1.9 per cent growth in the first quarter and a -0.3 contraction in the second quarter. The Ministry of Trade and Industry (MTI) expects Singapore growth in 2015 to remain modest at 2 to 4 per cent.

Some domestically-oriented sectors such as business services are expected to remain resilient for the rest of 2015, but labour-intensive sectors such as construction, retail and food services continue to face problems with tightness in labour market conditions. These labour constraints could slow their growth.

Advance estimates predict that the construction sector grew by 3.0 per cent in 2014, compared to 6.1 per cent in 2013. On a quarter-on-quarter basis, the sector grew by 1.8 per cent in the first quarter of 2014 before contracting by 6.1 per cent in the second. Slight growth of 0.1 per cent occurred in the third quarter, before rebounding by 8.0 per cent in the final quarter. Compared to the corresponding periods of 2013, the first three quarters of 2014 showed even greater increases of 10.5 per cent, 7.7 per cent and 5.8 per cent respectively. However, as tight labour conditions continue into 2015, the construction industry’s growth is expected to be modest.

Real Estate Prices and Rentals

Although prices of private residential properties rose marginally in the first three quarters of 2013, they began falling in the last quarter and continued falling through all four quarters of 2014 as the effects of the cooling measures implemented in 2013 kicked in. Statistics from the Urban Redevelopment Authority (URA) indicate that for the whole of 2014, prices have fallen by 4.0 per cent compared to an increase of 1.1 per cent for 2013. This is the first year of overall decline since 2008. Prices of private residential properties decreased by 1.1 per cent in the fourth quarter of 2014, the fifth straight quarter of decline. Prices declined by 0.7 per cent and 1.0 per cent in the previous two quarters of 2014 respectively. As a result, there have been calls to reduce the cooling measures and in February 2014, the Monetary Authority of Singapore announced the broadening of exemption from the Total Debt Service Ratio (TDSR) threshold for refinancing of owner-occupied residential properties purchased before the implementation of TSDR rules.

The luxury property market has been the hardest hit by the drop in private residential property prices, with reports of more luxury properties being sold at loss-making prices as a growing number of wealthy owners sell off their properties. According to data from Maybank Kim Eng, most of these properties are located in District 9 and Sentosa Island, areas which have traditionally attracted more foreign interest than other parts of Singapore. However, 90 per cent of properties were sold upon first auction listing in Q4 of 2014, compared to 80 per cent and 54 per cent in the preceding two quarters according to data from JLL. This can largely be attributed to a compromise of sellers’ and buyers’ price expectations, and proves that a weaker market is not necessarily an impediment to selling.

On the rentals front, private rental prices for non-landed private residential property dropped for 11 consecutive months since February 2014. According to the Singapore Real Estate Exchange (SRX) Property Price Index for Non-landed Private Residential Rentals, rents posted a drop of 0.8 per cent in December compared to November. Rents have already declined 6.4 per cent since the start of the year, and shoebox rentals are expected to drop anywhere from 5 to 10 per cent, especially for units that are further from the city centre or MRT stations. A record 6,200 shoebox units are slated for completion over the next two years, contributing to the fall in rental prices.

Prices of office space were less volatile than that of private residential properties. After a slight increase of 0.5 per cent increase in the first and second quarters, prices further increased by 1.6 per cent in the third quarter and 2.4 per cent in the last quarter. Rentals rose 2.4 per cent, 2.8 per cent, 2.6 per cent and 1.7 per cent in each quarter of 2014 respectively.

As at the end of the fourth quarter of 2014, there was a total supply of about 908, 000 square metres GFA of office space in the pipeline.

Prices for shop space remained unchanged during the first quarter of 2014, before declining slightly by 0.3 per cent and a further 0.2 per cent in the second and third quarters. Prices increased by 1.5 per cent in the final quarter. Rentals declined by 0.3 per cent in the first quarter before increasing by 0.6 per cent, 0.1 per cent and 0.5 per cent in the remaining quarters.

As at the end of 2014, there was a total supply of 785,000 square metres GFA of shop space from projects in the pipeline.

According to JTC’s industrial property market statistics, occupancy rates for industrial property reached their lowest levels since late 2007 in the second quarter of 2014. This was due to the increase in supply of industrial land by the Government in recent years. However, the price of all industrial space and multiple-factory space grew by 0.7 per cent and 2.5 per cent on a quarter-on-quarter basis in the same quarter. Prices declined in the third quarter of 2014 by 0.9 per cent and 1.8 per cent before falling further by 0.1 per cent and 0.2 per cent respectively in the final quarter.

Developments in Singapore’s Urban Landscape

Exciting times are afoot for Singapore’s built environment. The Government is pushing to develop Singapore as the world’s first Smart Nation, where transformational infocomm and media (ICM) technologies such as the Internet of Things (IoT), big data and analytics are utilised to make Singapore a better place to live, work and play. For more information on Singapore’s drive to transform itself into a Smart Nation, click here.

The introduction and adoption of higher productivity construction technologies such as the Prefabricated Pre-finished Volumetric Construction (PPVC) method and the use of new materials such as Cross Laminated Timber (CLT) are changing the construction game in Singapore, which has traditionally been extremely labour-intensive. According to Minister for National Development Khaw Boon Wan, these technologies can enable up to 50 and 35 per cent savings in manpower and time respectively. The government is implementing a requirement for these technologies to be used in the development of selected government land sales sites. Funding will also be provided by the BCA to support the adoption of these technologies. To read more about productivity improving technologies, click here.

Of course, Singapore’s push to continue greening the cityscape has not taken a backseat to technology adoption. As testament to green efforts, the Republic has been ranked among the world’s top 10 greenest cities in the Global Green Economy Index (GGEI) conducted by US-based environmental consultancy Dual Citizen. Furthermore, more than 61 hectares of building exteriors were planted with greenery by 2014, surpassing the initial goal of 50 hectares by 2030. With the new goal of 200 hectares of skyrise greenery by 2030, schemes and initiatives such as the National Parks Board’s Skyrise Greenery Incentive Scheme and the Urban Redevelopment Authority’s enhanced Landscaping for Urban Spaces and High-Rises (LUSH) programme will spearhead the continued green efforts.

Skyrise greenery is only one of the aspects where Singapore has reached its target ahead of time; the first Sustainable Singapore Blueprint was released in 2009, and the 2015 iteration will see other 2030 goals extended. The Sustainable Singapore Blueprint 2015 will focus on three areas: 1) A Liveable & Endearing Home; 2) A Vibrant & Sustainable City; and 3) An Active & Gracious Community. More parks will be developed close to homes, and more bicycle paths will be built to encourage the adoption of cycling as a mode of transport. Recycling, encouraging the adoption of greener modes of transport and the increased use of renewable energy sources such as solar power are also part of the Sustainable Singapore Blueprint. Together, these efforts will make Singapore a cleaner and greener city to live in. Read more about greening efforts in Singapore here.

On the public transportation front, construction of the Downtown Line 2 MRT line is well underway and is slated for completion by the first quarter of 2016. When the Downtown Line 2 is finished, it will comprise 12 stops and span 16.6 km to connect the Bugis area to Bukit Panjang. Construction on the 43 km long Thomson-East Coast Line has also started, and it will be the most accessible of all train lines in Singapore when it is completed in 2024, as each station will have more access points than any of the other stations along current train lines. It will add 31 new stations to the existing rail network, and the first stage is slated to be opened from 2019.