This is the biggest threat against Singapore’s robust construction sector

The slowing property market is a key drag.

Singapore’s booming construction sector is headed for a sharp slowdown in coming months, according to a report by BMI Research.

The sector’s growth will be constrained by the increase in supply across various property segments, a weakening economy, rising interest rates and tightening of immigration policies.

“A slowing economy, coupled with an oversupply in the private residential market has prompted us to downgrade our growth outlook for Singapore's construction sector. We now forecast real growth of 2.3% and 2.1% in 2015 and 2016 respectively. We do not expect a swift recovery in the country's property market and continue to expect moderate growth averaging 2.8% annually between 2017 and 2019, with large public infrastructure projects being the key support for the sector,” BMI Research said.

Data from the Ministry of Trade and Industry (MTI) show that Singapore's construction sector expanded by 2.5% year-on-year in Q2, bringing real growth for the first half to just 1.8% year-on-year. This represents a significant slowdown from the 5.2% real growth registered over the same period last year.

“Subdued growth in the construction sector over the past quarters have largely been led by the private sector (mainly residential and non-residential buildings), with private contracts awarded in H115 contracting by 30.9% y-o-y, significantly lower than public construction, which declined by 16.8% y-o-y over the same period,” said the report.