High material prices to remain a drag on Singapore construction this year: report

LOFTY metal prices will remain a challenge for Singapore’s construction industry in the foreseeable future after reaching record highs in 2021, according to a new report from multinational consultancy Linesight.

In a press statement on Monday (Feb 14), Linesight Singapore director Michael Murphy said he expects building material prices to stay high in 2022 before only stabilising to pre-Covid levels in early 2023.

This means that new construction and renovation projects both commercial and residential will remain higher than those experienced pre-2020, he said.

“A big reason building material cost more these days is that supply chains were disrupted during the pandemic. Those supply chains now need to catch up with demand and we are seeing concerted effort by stakeholders – material producers, port operators, transporters and government agencies – to clear the backlog of supplies. Once that happens, the cost of building material could start to decline,” added Murphy.

Based on the report findings, prices for lumber are expected to remain relatively high in the year to come following a 4 per cent increase in 2021 on an annual average basis. An ongoing recovery in residential construction will keep prices relatively high despite easing upward pressures, said the consultancy.

The jump in 2021 steel rebar and flat products prices at an annual average rate of 43 per cent and 53 per cent, respectively, also contributed to skyrocketing steel prices that have in turn, led to a sharp rise in overall construction costs in Singapore.

Though construction companies working on Housing and Development Board projects now have more support in the form of protected prices for steel, Linesight said an improvement in the global supply-demand balance will support a steady easing of prices in 2022.

While the consultancy foresees the copper market will cool amid improved supply this year, it said ongoing tightness and weak inventory levels will prevent a marked drop in the metal’s prices.

Cement, concrete and brick prices are anticipated to remain relatively unchanged.

Despite the continued challenge of high material costs, Linesight sees local real construction output surpassing pre-pandemic levels by end-2022.

Highlighting Singapore’s 14th global position for ease of doing business based on rankings by data platform Knoema, Linesight said this demonstrates the country’s conducive regulatory environment for business operations.

“Of course, material pricing and supply will remain a fundamental factor in Singapore’s continued recovery and growth, with the labour market being particularly influential for its construction industry,” it stated in the report.