Over the past decade, Singapore’s construction industry experienced a relatively stable and predictable “golden development period.”
Project volumes were sufficient, pricing structures were generally healthy, cost fluctuations were manageable, and as long as management remained disciplined, most companies were able to maintain reasonable profit margins.
However, this phase has clearly come to an end.
The industry has now entered a new cycle marked by intense competition, compressed margins, and front-loaded risk.
1. Continuous Price Compression and a Fundamental Shift in Competition
The most visible change in today’s market is the persistent decline in project pricing.
At the tendering stage, pricing is no longer about “reasonable competition,” but has evolved into survival-driven bidding:
- Many contractors bid at or near cost, and in some cases below cost, simply to secure projects
- Competition has shifted from “capability-driven” to “who can endure longer and take greater risks”
- Small and mid-sized contractors are forced into price wars or risk having no projects at all
As a result:
Once a contract is signed, profit margins are effectively locked in.
Any subsequent cost fluctuation immediately erodes cash flow.
2. Comprehensive Cost Increases with Growing Uncontrollable Factors
In stark contrast to declining prices, overall cost structures continue to rise systemically, and most of these costs are beyond contractors’ control.
Rising labour costs
- Continuous increases in foreign worker basic wages
- Stricter regulations on overtime, public holidays, and allowances
- Shortage of skilled workers, with foremen and technical trades commanding clear premiums
Sharp increases in worker accommodation and living costs
- Ongoing increases in compliant dormitory rental rates
- Higher transportation, management, and welfare costs
- Tighter regulations, higher compliance risk, and very low tolerance for violations
Rigid levy and administrative costs
- Foreign worker levies are long-term, fixed obligations
- Levies must be paid even when workers are underutilised
- Any project delay quickly causes costs to spiral out of control
Frequent fluctuations in construction material prices
- Significant volatility in steel, cement, formwork, and hardware prices
- Long-term projects cannot fully lock in material costs
- Contractual price-adjustment mechanisms are often insufficient or delayed
The conclusion is clear:
Costs continue to rise, but no one bears the risk on your behalf.
3. Long-Term Projects Have Become “Hidden Landmines”
Ironically, long-duration projects are among the most severely impacted.
Projects signed two or three years ago were based on cost assumptions that no longer hold true. During execution:
- Labour costs increase year after year
- Material prices undergo multiple rounds of adjustment
- Project delays have become the norm rather than the exception
The end result is often:
Projects appear active on paper, but are in fact losing money continuously.
Many companies are trapped in a dilemma:
- Stop → breach of contract, penalties, reputational damage
- Continue → ongoing cash-flow bleeding
This explains why in recent years:
- The more projects some companies take on, the greater their losses
- Operational activity appears busy, yet financial health steadily deteriorates
4. Profits Are Compressed While Risks Are Fully Pushed Downstream
Today’s Singapore construction market is essentially structured around downward risk transfer:
- Owners demand fixed pricing
- Main contractors push risk to subcontractors
- Subcontractors further compress manpower and site costs
Ultimately, however:
- Policy risk
- Cost risk
- Schedule risk
- Manpower risk
are all concentrated on front-line contractors.
Any single failure point can instantly wipe out remaining profit.
5. The Industry Is Transitioning from Expansion to Elimination
Overall, the Singapore construction industry is undergoing a clear structural shift:
- It is no longer suitable for aggressive expansion
- It is no longer viable to rely on volume alone
- It is no longer wise to blindly commit to long-term projects
The companies most likely to survive are those that:
- Exercise extremely refined cost control
- Prioritise cash-flow management over scale
- Select projects more cautiously
- Strengthen management, digitalisation, and platform-based operations
- Can endure short-term pain rather than betting on a market rebound
