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SINGAPORE (EDGEPROP) - In his speech at the commencement of the OrangeTee & Tie Business Conference 2021 on May 24, Desmond Lee, Minister for National Development, provided an update on the manpower shortages faced by the local construction sector and the knock-on effects on scheduled project completion dates. He also shared the government’s approach towards affordable public housing in prime areas in the future. (See: HDB launches 3,740 flats for sale in February 2021 BTO exercise)
The minister was the guest of honour at OrangeTee & Tie’s annual event. This year, it was a hybrid physical and digital event for the agency’s members due to safe management measures under the current Phase Two (Heightened Alert).
Rising costs, more delays
The rise in the cases of more transmissible Covid-19 variants in high-risk countries has caused the government to tighten border controls to restrict the inflow of travellers from these countries, some of which are in South Asia.
“This has significantly worsened manpower shortages in our construction sector, as South Asian countries are where we recruit most of our construction work permit holders,” says Lee.
The local construction industry has faced a foreign worker crunch since the start of the pandemic last year as the country takes a cautious approach to reopening borders. “We have also been careful in bringing in migrant workers to reduce the risk of importing the virus,” says Lee, adding that the government faces a difficult trade-off.
Lee: We have been careful in bringing in migrant workers to reduce the risk of importing the virus. (Picture: OrangeTee & Tie)
This crunch has led to several leading industry stakeholders in the built environment sector issuing a joint statement to the Multi-Ministry Taskforce on May 17, appealing for the safe and controlled entry of foreign workers to alleviate the “acute manpower situation” the construction industry faces.
Signatories of the joint statement include the Association of Consulting Engineers Singapore, Real Estate Developers’ Association of Singapore, Singapore Institute of Architects, Singapore Institute of Surveyors & Valuers, and Society of Project Managers.
The joint statement highlights that the complexity and nature of construction work necessitates the deployment of workers from various trades, and the current reduced workforce is already working at maximum capacity and increasing the risks of workplace incidents.
In his speech on May 25, Minister Lee said that the government has stepped in to help firms in the construction sector through funding support and providing legal mechanisms to help companies share cost increases. But he also admits there will inevitably be negative impact on the industry, with costs expected to increase and projects delayed even further in both the private and public sectors.
In line with the government’s stance to ensure that public housing remains affordable to Singaporeans, Lee says that the HDB will continue to price build-to-order (BTO) flats based on the affordability for home buyers and not on cost recovery. (See: Find HDB flats for rent or sale with our Singapore HDB directory)
Both public housing and private residential projects are expected to see more delays, as the construction industry faces an acute foreign worker shortage. (Picture: Samuel Isaac Chua/The Edge Singapore)
“Hence, the rise in construction costs will not affect new flat prices. HDB is also working closely with contractors to minimise the delays to our BTO projects,” he says.
However, he adds that the current pipeline of BTO projects is still expected to be delayed by a further three months, from the six to nine months that the government previously announced in April this year.
“Whether you are waiting for your HDB flat, waiting for your rental flat, waiting for your private property, or waiting to renovate to fix some problems in your existing home, I thank you for your forbearance as the industry across the board struggles with the challenges posed by Covid-19,” says Lee.
Resale prices increase
The downstream implications will impact some home buyers who may need to rent a place temporarily or extend current rentals while they wait for their homes to be completed. Others may need to negotiate a delay to the handover date, and it is likely to fuel demand for resale flats and private residential properties on the secondary market.
Resale flat prices have already seen an increase. Statistics from HDB show that prices of resale flats rose by 3% q-o-q in 1Q2021, marking their fourth consecutive quarter of increase. On a yearly basis, resale flat prices in 1Q2021 climbed by 8.1%.
The annual OrangeTee & Tie Business Conference was held both physically and digitally this year, due to safe management measures under the current Phase Two (Heightened Alert) (Picture: OrangeTee & Tie)
Lee says that the estate agency business and agents are “well-positioned” to advise home buyers on how to navigate the challenging situation. “For those who are looking to rent or buy from the [secondary] market, we hope you can encourage them to consider their housing budget for the long term, and the uncertainties thrown up by Covid-19, and not risk overstretching themselves or putting themselves in greater uncertainty,” he says.
He cautions that while the low interest rate environment may look attractive at the moment, the broader economic situation remains uncertain and home purchase is a long-term commitment.
Future public housing in prime locations
The minister also shared the government’s plans to launch public housing in “very prime areas” in the future. Runaway housing prices in some global cities have made homes unaffordable to the average home buyer there and are a cautionary example for Singapore, he says.
“Singapore is not immune to these trends. These are very powerful social and economic forces at work. But we are determined to do our best to resist them, to keep our society egalitarian and inclusive, even as we start to see some of these challenges playing out in our very own city,” he adds.
Therefore, he says, the government will push forward with its plans to build public housing, including public rental housing, in prime locations such as the city centre and the Greater Southern Waterfront. The government also wants to ensure that these flats remain affordable not just at the sales launch phase or the Sale of Balance Flats phase, but throughout the entire 99-year leasehold period.
This could mean the introduction of additional subsidies on top of existing grants. “But this is easier said than done, because there are many other downstream effects we have to consider,” says Lee. These include a potential “lottery effect” where owners stand to reap big rewards when their flats are eventually sold on the resale market. Thus, the government may have to recover some of the additional subsidies to level the playing field.
View of Keppel Club golf course – where 9,000 new homes will spring up in the future (Credit: Samuel Isaac Chua/ EdgeProp Singapore)
The government has received many suggestions from the public regarding its plans to build public housing in prime locations. Some suggestions include flats with shorter leases or with a longer minimum occupancy period to emphasise that public housing is primarily for occupation and not investment.
It has also been proposed that such flats be sold back only to the government who will then regulate the resale price. “But it is challenging to ascertain a fair buyback price, and we may want to avoid artificially guaranteeing the values of these flats, which existing flat owners may view as unfair,” says Lee.
He acknowledges that these are not easy trade-offs, and the government faces a difficult balancing act in pursuing its policy of building public housing in prime central locations. Some Singaporeans have written to say that the government should not go forward with this housing plan, he notes.
“That really shows the diversity of views, and how challenging it is, but we have to do this, to ensure that our society and city remains open to all,” says Lee.