Singapore’s construction costs may climb by as much as 6 percent in 2011 when government rules that restrict foreign workers set in, according to several property experts.
Among the manpower constraints that will start this month include a rise in the foreign worker levy and a reduction of man-year entitlement, restricting the number of foreign workers on a site. A new rule that will limit noise in construction sites will also be implemented in September.
Experts claimed that the changes may drive up overall costs and prolong the duration of projects. Several industry players are also concerned about the rising cost of crude oil and volatility in commodity prices.
"For this year, we think there’ll be an increase in the order of 3 percent. For next year, we expect it to be a little higher, probably in the range of 5 to 6 percent. Construction demand is the key driver in terms of price escalation, tender price escalation," said Winston Hauw, managing partner of consultancy firm Rider Levett Bucknall.
The latest quarterly Real Estate Sentiment Index indicated that 9 out of 10 respondents, which include market watchers and developers, are concerned about increasing land prices.
Meanwhile, 76 percent are worried about the increase in labour costs and building material.
The index is jointly developed by the Department of Real Estate at NUS and the Real Estate Developer’s Association of Singapore (Redas). Redas hopes the index will become a forward indicator for the sector and an authoritative quarterly index, said Steven Choo, chief executive of Redas.
"It will provide the market with an idea of how the real estate development players perceive the market, so it will benefit the investors and guide them in their decisions," he said.
Mr. Choo added that the index could influence policy directions, as well as provide insight to developers on industry trends.