SINGAPORE : Round-the-clock work on major projects is putting a strain on construction resources. That coupled with a general upward trend in prices is pushing overall construction costs higher by as much as 30 per cent, according to consultants.
Consultants say they expect developers to face pressure on their margins going forward.
Cost pressures in Singapore's construction sector are widespread, according to consultants.
Donald Han, Managing Director, Cushman and Wakefield, says: "Every segment of the market, let it be the Sands at Marina Bay, let it be the industrial, the residential - all the commercial sector have increases in construction costs.
Overall, if you look into the construction industry, you would see an increase of about 20 to about 30 percent."
Contractors say the reasons go beyond Indonesia's sand and granite ban earlier this year.
As it is, the many major projects under construction are already putting strains on plant, equipment and labour.
But they also see developers pushing to complete their projects by 2010, to tie in with the opening of the two integrated resorts.
Simon Lee, Executive Director, Singapore Contractors' Association, says: "There are developers who actually want to have a short time frame for the construction. And because of short time frame, some of these works need to be accelerated. People will need (to work) longer hours and they may need to do shift work. So that has actually increased the prices."
Property consultants say the average construction cost per square foot now runs at about S$350 compared to S$250 a year ago.
They say developers were able to quite comfortably pass on the higher costs to home buyers in the first half of this year.
But going forward, they expect developers to drive harder bargains with vendors.
Mr Han says: "They would probably be looking into factoring any increase in construction costs at the early stage of buying the property, buying the land. They won't pay the price of what the vendor is asking. They will basically go in to negotiate the price to factor in all the risks. They'll probably put in a certain factor of appreciation. But a market like now it's a bit harder to tell."
Despite increases in land prices and construction costs, consultants stress that Singapore's property market remains fundamentally sound.
They note that they are still seeing healthy demand from home buyers and rental tenants. - CNA/ch
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