Move to build more HDB flats may benefit construction industry

Analysts said the move by the Ministry of National Development to build more HDB flats may give the local construction industry a fresh boost.

The majority of first time HDB home buyers can rejoice with the MND’s decision to develop more build-to-order (BTO) flats this year.

And with the decision to address rental flat shortages, industry observers said the planned supply changes would be positive for the construction industry as developers bid for more contracts.

However, the plan for more homes in Singapore also comes with challenges like rising costs in the industry.

“If you suddenly have an increase base you need more of these materials. These stockpiles may not be adequate so you’ll have to import more,” said Mr Vashdev Khialani, engineer at C&V Consultants LLP.

“Prices of construction will generally go up across the board, whether it is HDB or private, residential, commercial or industrial.”

And the need for more construction workers will only add to construction price woes.

“Foreign worker levies are on the uptrend, so construction companies when they bid they have to be more aware. They’ve got to price their costs very carefully, and see if they can retain an attractive margin,” said investment analyst at SIAS Research, Liu Jinshu.

Industry observers said that aside from construction, engineering businesses will also benefit from more HDB supply as a chain effect.

Analysts added that a lift in income ceiling for first time buyers could further prompt HDB to build flats ahead of demand.

“The ceiling is S$8,000 for first time flat buyers. So if they do lift up this ceiling, then it would be an astute move to build ahead of demand, to smooth any impact on the raising of the income ceiling as well,” said Mr Liu.

Going forward, analysts said a likely rise in income ceiling may shift preferences for private homes in the mass market condo segment to the HDB market.

Source : Channel NewsAsia – 30 May 2011

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