Labor, Material Constraints Behind Soaring Costs For Construction Companies, Property News & Top Stories

SINGAPORE – The costs of labor and building materials in the construction sector have skyrocketed since the start of the Covid-19 pandemic, delaying projects and affecting the cash flow of companies in the Supply Chain.

Here are the main costs that businesses face:

1. Salaries

Before the pandemic, a basic skilled worker earned about $ 800 per month, according to the Straits Times. More skilled workers earned $ 1,600.

But there has been a shortage of workers over the past year due to tighter border rules and secure management measures.

Companies with workers whose work permits have expired have also encountered difficulties in renewing them.

As a result, wages have increased by 10 to 50%, as companies compete for an increasingly tight labor pool. Poaching of workers with the promise of higher wages has become more common.

The Singapore Contractors Association (Scal) said average wage costs rose 46% for similar jobs compared to the time before the pandemic.

2. Taxes on foreign workers

Entrepreneurs are also impacted by the levies on foreign workers, which range from $ 300 to $ 950 per month, depending on the skill level of the worker.

The levy discount for eligible construction workers has been increased from $ 90 per month before May to $ 250 for the period between May and the end of December.

Lian Beng Executive Chairman Ong Pang Aik said that although the rebates have helped, the government should continue to lower the levy until the industry recovers, to offset the sharp rise in wages.

A worker’s pay could be double their base salary once costs such as sampling, accommodation, food expenses, overtime as well as mandatory testing for Covid-19 and others. Safe management measures are taken into account, according to ST.

Workers entering Singapore must also serve a stay-at-home notice at dedicated facilities that their company must pay for.

3. Construction materials

The prices of major building materials such as steel, copper and aluminum have skyrocketed since March of last year due to supply constraints.

Mr Darrell Lim, executive director of BRC Asia, said a drop in production in China as lockdowns hampered supply, along with growing global demand, had pushed prices to record highs.

Steel, for example, has jumped nearly 40 percent per tonne since the start of last year, the Building and Construction Authority noted.

As a result, material costs for steel rebar increased by 54 percent, aluminum by 59 percent, copper by 81 percent and concrete by more than 20 percent, according to Scal.

Other materials such as cement, granite, sand and ready-mixed concrete increased by 3-10%.

4. Shipping

Singapore imports most of its building materials. A delay in global deliveries caused by the closure of several key Chinese port terminals has pushed freight rates up, said Mick Aw, senior advisor at consultancy Moore Stephens.

These disruptions have resulted in a shortage of ships and containers, exacerbating cost pressures on construction companies here.

Freight rates from China to Europe have already doubled since the middle of last year, while rates between Asia and the United States have increased by 400%, Aw said.

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