Oral Answer by Ministry of National Development on impact of COVID-19 on construction costs in Singapore

Jul 26, 2021

1378. Ms Tin Pei Ling: To ask the Minister for National Development (a) how has the COVID-19 pandemic impacted construction costs in Singapore; (b) what are the contributing factors; and (c) how will public estate upgrading and construction projects that are in the pipeline before the COVID-19 pandemic but only had the tender called this year be affected.

1379. Ms Tin Pei Ling: To ask the Minister for National Development given the current high construction costs, how will this affect the demand for green building projects and Singapore’s Green Plan.

Answer: 

Sir, construction costs in Singapore have increased due to the COVID-19 pandemic. The contributing factors include an increase in foreign manpower costs due to border measures that limit the inflow of our migrant workers, additional costs and reduced productivity due to the Safe Management Measures at the worksite to lower the risk of transmission in the sector, as well as increases in the cost of construction materials. 

The Government has implemented a suite of support measures to help construction firms cope with the additional costs arising from COVID-19. For example, the $1.36 billion Construction Support Package helps share the costs that firms have incurred for implementing safe management measures, as well as non-manpower related prolongation costs for public sector construction projects. Firms have also received support for manpower costs through the Jobs Support Scheme and Foreign Worker Levy waivers and rebates. We also provided rental waivers for tenants and lessees of Government-owned properties for industrial, office and agricultural use, and are sharing the risks for bridging loans to help qualifying Singapore-based companies ease their cashflow. In addition, we put in place unprecedented legislative mechanisms to provide relief to construction firms. For example, the COVID-19 (Temporary Measures) Act requires project parties to fairly share the increases in foreign manpower costs due to COVID-19. 

These measures have mitigated some of the cost increases facing construction firms. That said, tender prices for public sector construction projects, including public housing and upgrading projects, have generally increased this year compared to pre-COVID levels. We recognise that public housing projects are necessary to serve the needs of Singaporeans, so we will press on to deliver these projects, and maintain a steady supply of public housing to meet demand. Increase in cost will not be passed down to flat buyers. Since August last year when BTO construction work fully resumed, HDB has been working with its contractors and consultants to keep construction progress on track and avoid further delays as much as possible, while ensuring that project quality and safety standards are not compromised. HDB is also supporting contractors to bring in more workers from various countries, and working with other agencies to minimise cost increases and reduce construction delays. For upgrading projects, HDB resumed construction works progressively from August last year. HDB has also been similarly working with its contractors and consultants to minimise the delays to these projects, while ensuring that any upgrading works are carried out in adherence to prevailing Safe Management Measures. 

The rise in construction costs has not adversely affected the demand for green buildings. The Gross Floor Area, or GFA for short, of developments applying for Green Mark certification has remained steady at around half of overall construction demand since 2018. One possible explanation is that the cost premium of fulfilling the Green Mark requirements is small in proportion to overall construction costs, at less than 5% for most projects. 

Furthermore, the resultant energy savings during the life cycle of a building outweigh the upfront investment costs. For example, a large office building of over 15 storeys which achieves the Green Mark Platinum standard can save around $300,000 in operating costs annually. The Government also provides funding support for the development and deployment of green technologies, and works with financial institutions on the financing of energy efficiency retrofits. 

The Government remains committed to pursue our sustainable development agenda under the Singapore Green Plan 2030. Some infrastructure projects may face construction delays in the immediate term, but we will press on with our plans and sustainability efforts. We will also continue to monitor the impact of the pandemic on the sector and work closely with trade associations and other partners to support the industry through this crisis.