RICS Survey shows infrastructure workloads fail to support broader construction activity

Construction activity was fairly restrained in the first quarter of 2019, with robust growth only in infrastructure and other public works such as rail, airport and road projects, said RICS in the Singapore Construction and Infrastructure Survey released on 2 May.

Apart from infrastructure and other public works, participants of the survey reported a decline in workloads during Q1. This is somewhat indicative of the global property cycle being in its later stages (Chart 1).

In net balance terms, the pace of increase of infrastructure workloads was substantial. As shown by Chart 7, infrastructure workloads increased across all market segments, all at a faster pace than was noted by respondents in Q4 (in net balance terms).

In Q1, contributors highlighted particularly robust growth in work on rail, airport and road projects, though over the next year utilities projects are expected to see the biggest increase in workloads (Chart 8).

Despite increased activity on infrastructure projects, profit margins were seen to broadly have deteriorated during Q1 (Chart 2). Respondents also flagged a sharp increase in payment delays.

Chart 4 shows that respondents’ one-year expectations have become more pessimistic, as workloads are now only expected to increase modestly, headcount is expected to be unchanged, and the cost of materials is expected to rise sharply (in net balance terms). Against this backdrop, profit margins are expected to experience further tightening.

Chart 3 highlights several factors that a majority of respondents highlighted as holding back activity. Among these are competition (identified by 75 per cent as a constraint), the cost of materials (73 per cent), financial constraints (72 per cent), shortages of labour (64 per cent), a lack of demand (58 per cent), regulation (58 per cent) and a shortage of skills (56 per cent), though Chart 5 shows that no one skill was identified as being particularly dear by a majority of contributors. — Construction+ Online