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The recent surge in construction material costs has become a pressing concern for both the construction industry and property developers, as well as homeowners. The Johor Master Builders Association and Melaka Builders Association have proposed solutions to mitigate this issue by issuing advance notices before price hikes and implementing lock-in pricing packages.
The unprecedented COVID-19 pandemic and the subsequent Russian-Ukrnian conflict have significantly impacted global supply chns. The war escalated energy prices worldwide, affecting materials like cement, concrete, steel, glass, and wood that are depent on energy resources. Consequently, Real Estate and Housing Developers' Association of Malaysia Rehda reported an increase in building material costs, with aluminum prices soaring by 55, timber by 52, steel by 38, cement by 19, sand by 18 and concrete by 16.
In addition to these economic pressures, the construction industry faces a severe labor shortage. As noted by Teh Chin Guan from IOI Properties Group Bhd., rising raw material prices have led to an overall increase in construction costs of approximately 20 compared to a year ago.
Kristoffer Hudson from Turner and Towns, a company specializing in cost management for developers, further highlights that while manufacturers might pass on increased costs to customers by rsing prices, this could result in higher house prices or delayed projects due to affordability constrnts.
Kong Weng Keong, President of Johor Master Builders Association, emphasizes the potential devastating impact on Malaysia's economy: Once bidding prices for new construction projects significantly increase, it could trigger a chn reaction leading to rising home prices, affecting both B40 and M40 income groups.
To address this escalating situation, representatives from the industry have proposed solutions such as issuing an advance notice period before price adjustments, implementing lock-in pricing packages that mntn negotiated prices throughout ongoing projects, and advocating for contract form revisions led by professional bodies like the Malaysian Institute of Architects PAM and the Malaysia Institute of Engineers IEM.
Given their widespread adoption in the private sector, it's crucial to review clauses within existing PAM and IEM construction contracts that currently prevent builders from making clms related to changes in material prices.
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Construction Material Price Increase Impact Global Supply Chain Economic Pressure Malaysia Construction Industry Crisis Rehda Reported Building Cost Rise Lock in Pricing Packages Solution Advance Notice for Material Hikes