High growth forecasts for the building sector

Business Asia, August 30, 1999

* Following are the findings for 10 countries in the BIS Shrapnel study, "Building and Construction in the Asia-Pacific Region 1998-2001".

Hong Kong

A recovery of 8 per cent is forecast for 2000 and 39 per cent in 2001 -- led by infrastructure construction in which government spending will increase significantly.

Following two years in the doldrums, stability will return in 2000 to the residential building sector, followed by a 25 per cent recovery in 2001.

Non-residential construction will decline by 11 per cent in 1999 but recover by a similar margin in 2000 backed mainly by a strong increase in educational and health building.

A new engineering construction boom will occur over the period 2000-03 boosted by new rail and highway and territory development projects.

South Korea

The construction sector's contribution to gross domestic product fell by 20 per cent in 1998. Residential building is expected to fall again in 1999 and 2000 but register a moderate recovery in 2001.

The non-residential sector will decline by a further 7 per cent in 1999 before a 10 per cent recovery in 2000 and 21 per cent in 2001. As growth gathers momentum, foreign capital inflows will accelerate and drive up demand for commercial office space. The recovery at the turn of the century will also be driven by growing retail and hotel building.

Civil engineering will stabilise in 1999, increasing strongly in 2000 and 2001.

Singapore

Residential building activity increased by 49 per cent to a record high of US$11.2 billion in 1997, but fell by an almost similar margin in 1998 with a build-up of unsold private housing stock dragging down the market.

The sector is forecast to decline by just 6 per cent in 1999, before stabilising in 2000 and improving fairly strongly in 2001.

The short-term outlook for commercial and industrial property is gloomy, but institutional building levels (especially in educational building) are expected to remain at high levels.

Following a 35 per cent decline in 1998, engineering construction will recover strongly in 1999 with increased government spending on infrastructure.

Malaysia

Residential building is expected to stage a 7 per cent recovery in 2001 led by low- and medium-cost dwellings. Affordable housing will continue to be in demand from a relatively young population.

Significant quantities of commercial property are still to come on stream and non-residential building will not recover until at least 2002.

Infrastructure construction declined in 1998 and will decline again in 1999 due to tight liquidity.

Thailand

The property market will require five years to absorb existing stock and the recovery in building will lag behind economic recovery. The next building boom will not occur until the second half of the next decade.

Residential building is below one-fifth of its peak year and will mark time in 1999 before recovering by 4 per cent from a low base in 2000 and by 19 per cent in 2001.

Commercial building is unlikely to increase over the next three years from its very low level, and no substantial recovery is forecast for industrial building before 2001.

The Philippines

Residential building declined in 1998 and will mark time in 1999 before a recovery sets in over the two years to 2001, boosted by increased government spending on mass housing.

Non-residential building peaked in 1997 but declined by 48 per cent in 1998.

This sector will recover moderately in 1999 and strengthen in 2000 and 2001.

Commercial building declined by 56 per cent in 1998 but will begin to recover in 1999. Industrial building will also rebound in 2000 and 2001 and sustained government spending on health and education will see this sector grow by 12 per cent annually.

Taiwan

After a three-year downturn, total building completions increased marginally in 1998 and will surge by 13 per cent in 1999 due to a 35 per cent increase in residential completions.

Total building completions will decline in 2000 and 2001 due to a slump in the residential sector, partly offset by increases in non-residential building.

Infrastructure will rise substantially over the next five to 10 years with investment in railways, rapid-transit systems and highways.

China

BIS Shrapnel forecasts enormous opportunities in the housing construction sector, with authorities working towards a strong housing market and transforming the socialist housing system into a commercial one.

The commercial property market in the four main cities will remain in the doldrums because of oversupply.

China's infrastructure is still far from sufficient to meet rising demand and infrastructure investment will continue to increase by more than 30 per cent annually over the next two or three years.

Vietnam

Unlike much of the rest of Asia, Vietnam's overall building sector is not oversupplied.

Housing is in particularly short supply, as is urban infrastructure. The other sectors will remain substantially weaker in the short term. A desperately needed upturn in engineering construction will occur in 2000 or 2001.

Indonesia

The construction industry should register 22 per cent growth in 2000 and 2001, backed mainly by infrastructure construction.