BCIS' Five Year Construction Forecast

BCIS Five Year Forecast Q12009 - Q12014

Tender prices for new construction work may not start rising until 2011 in UK, and won't return to pre-recession levels during the forecast period, says the latest five year forecast from the BCIS (RICS' Building Cost Information Service).

Tender prices are predicted to fall 5.2 percent in 2009 and a further 1.8 percent in 2010, before returning to 3.3 percent growth in 2011. Such decreases will be a result of sharp declines in new work output through 2009, with slower falls expected in 2010 before returning to modest growth in 2011.

However should the recession in housing, industrial and commercial in the private sector be more drawn out than predicted in the central forecast, with growth not returning until 2012, then the price of new construction work will continue to fall through 2011 at a rate of 1.9 percent. A cut in public spending would have a similar effect on tender prices, meaning tenders would suffer around a 15 percent peak to trough fall over a period of four years.

Such cuts would also see the rate of growth in tender prices, once it comes, move more slowly. If public spending in construction were to be cut by 10 percent per year between 2011 and 2013, then tenders would only rise by around 7.5 percent over the two years, 2012 to 2013, compared with around 9.5 percent in the central forecast.

Commenting on situation in Hong Kong, Mr. Kenneth Kwan, Chairman, Quantity Surveying & Construction Professional Group Committee, RICS Hong Kong, said, "After a decline of over 10% between the third quarter of 2008 and the first quarter of 2009, the fall in tender prices has moderated considerably in the second quarter. Although activity in the local construction market remains weak, there are strong signs that there will be significant improvements in the coming months when construction works on many government-funded infrastructure projects and public buildings commence."

"Also, in recent months international commodity prices have rebounded and steel material prices have strengthened. After many months of depression, inflation, albeit mild, is expected to return as the US dollar which HK dollar is pegged with becomes weaker against other major currencies. It is very likely that tender prices in Hong Kong will reverse their downward trend and show some upward movements by the end of this year. For Macau, construction activity is expected to remain weak and construction costs remain suppressed in the remaining months of this year unless and until construction works on major suspended projects resume. For Mainland China, total investment in construction projects during the period January to August 2009 has increased by 36.2% year-on-year to around 34,000 billion yuan while total planned investment in new projects in the same period has increased by 81.7% year-on- year to 9,674 billion yuan. With increased construction activities country wide, tender prices are expected to increase mildly in the next few months."

Source:  http://www.ricsasia.org

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