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With prices of sand, granite and concrete now costing more than twice what they used to be, home buyers and home owners should expect to pay more for renovation and building work.

But exactly how much more will depend on the deal that they signed with their contractor and their relationship with him.

The price hike was triggered by Indonesia’s ban on the export of land sand on Feb 5, which led to Singapore turning to countries further afield for its supplies.

A few weeks after that, Indonesia detained barges carrying granite to Singapore, disrupting the supply of another basic construction material.

The price of sand used to be roughly $20 per tonne. Now, the Building and Construction Authority (BCA) is releasing sand from its stockpile at a price of $60 per tonne, and granite at $70 per tonne to stabilise supply. 

The price of concrete - which is made with sand, cement and granite - has risen from about $70 per cubic metre to about $200 now.

As a result, the cost of renovating a five-room flat has risen by about $1,000, estimates renovation contractor Lim Ah Bah, who is also an adviser to the Singapore Renovation Contractors and Material Suppliers Association.

To build a $2.5 million bungalow from scratch will require more raw materials - with the increase in cost weighing in at about $100,000.

But whether a home owner bears the cost will depend on factors like timing. Property owners who signed fixed-price deals with their contractors before the disruptions started are legally not obliged to pay more.

Still, some like engineer Siow Phek Chuan, 28, chose to do so out of goodwill.

Mr Siow hired a renovation firm in early February to do up the executive flat in Sengkang he had just bought. 

A few weeks later, his contractor, Mr Lim , approached him for help, as the price of sand needed for the $35,000 project had risen by about $750.

Mr Siow offered to pay an extra $300 anyway. He told The Straits Times: ‘My renovation would be done up better if I have a very good relationship with my contractor. A few hundred dollars is not a big issue.’

However, the cost increase is not dealt with so amicably in every instance.

According to a Straits Times check with more than 10 renovation contractors and building contractors, it is more common for home owners and developers who had sealed fixed-price deals before the hikes to refuse to pay a single cent more.

With Singapore’s current building boom unlikely to slow, the big question now is who will ultimately pay the bill.

BCA estimates that the increase in prices of sand and granite will raise total construction cost of building projects by 7 per cent on average.

This works out to a 2 per cent increase in development cost - of which construction cost is one component. And this will eventually filter down to home buyers and home owners.

Renovation contractors and construction firms polled say they are now more likely to push for a clause in their contracts that takes into account the fluctuation of raw material prices. If that is not possible, they will tender for jobs at higher prices to prepare for similar hikes in the future.

Private developers mostly stayed silent when asked whether the future cost increases would be passed on to home buyers, but analysts reckon that the answer is almost certainly a yes.

According to property firm Knight Frank’s director of research and consultancy, Mr Nicholas Mak, most of the increase in cost can be easily passed on to consumers in a booming private property market.

And this sector has been anything but sluggish over the previous year, with private home prices growing 4.6 per cent between January and March, and 10.2 per cent for the whole of last year.

Before the ban, Singapore imported about six to eight million tonnes of sand from Indonesia annually. 

Singapore also imports about 10 million tonnes of granite aggregate from Indonesia a year.

Now, contractors are tapping supplies in countries like Malaysia, China and Vietnam.

Contractors also say they are getting frequent offers from brokers or ‘middlemen’ hoping to make a quick buck by trying to hook them up with suppliers from new sources such as Myanmar, Cambodia and even Australia.

Source : Straits Times, 07 April 2007

Hit by sand price hike, they want new clause in contracts to cover price fluctuations

Building contractors, hard hit by recent hikes in prices of sand, granite and concrete, are taking steps to protect their bottom line.

Many say they will start looking to put a clause in future contracts to take into account fluctuations in raw material prices. If not, they will tender for future jobs at a higher price to prepare for contingencies.

The Singapore Contractors Association is also doing its own survey to gauge the real impact of the situation on its members.

Millions of dollars are at stake. Prices of concrete - made with sand, aggregate and cement - are now about three times what they used to be, at around $200 per cubic metre.

Many contractors who signed fixed-price deals with developers or even government agencies, before Indonesia’s ban on sand exports was imposed in February, are now paying the higher costs upfront to avoid any delays. But they are also worried about not being compensated for the increases.

The association’s president, Mr Desmond Hill, told The Straits Times on Thursday that contractors were still bearing the full cost of the increases.

The Government, on its part, has committed to paying up to 75 per cent of the extra costs involved for public sector projects, and will make its first payments from this month.

Government agencies such as the Singapore Prison Service and the Singapore Sports Council have already started processing the claims submitted by their contractors, while the Housing Board, Land Transport Authority, JTC Corp, the Ministry of Health, the National Parks Board, and the Defence Science and Technology Agency are expecting their contractors to submit claims for the additional costs early this month.

The Government has strongly urged developers to work out cost-sharing arrangements with their contractors, but at the same time acknowledged that it cannot force a solution when it comes to private sector deals.

The Straits Times checked with 10 developers on the impact of rising material costs and if they planned to help out their contractors. Four of them either did not respond or said their spokesmen were busy or out of town. The rest mostly said that they will work with their contractors on a case-by-case basis.

According to the Building and Construction Authority, the combined effect of the increase in sand and granite cost will raise construction prices by 7 per cent on average, and development costs by 2 per cent.

General manager of Straits Construction Kenneth Loo estimates a residential project is likely to cost 8 to 10 per cent more to build now. This means it could cost up to $5 million more to build a $50 million condo.

Another major contractor, who sought anonymity, said his firm could lose about $20 million from three ongoing private residential projects worth more than $160 million if he bore the full brunt of the increases.

Meanwhile, small-scale builder Yaw Eng Construction expects to at best break even from the four property maintenance contracts that it has.

One of its directors, Mr Tommy Chua, said: ‘If we are going to tender for projects anymore, we will base it on current prices, or add in a few more percentage points just in case.’

Source : Straits Times - 7 Apr 2007

Govt looking into speeding up compensation payments to contractors on public sector projects

The Government might consider expediting compensation payments to contractors on public sector projects to help their cash-flow woes following the recent spike in the costs of raw materials, Minister for National Development Mah Bow Tan said yesterday.

Prices for sand and granite aggregates have shot up following Indonesia’s ban on land sand exports in February, and the recent disruption to granite supplies after Indonesia detained barges suspected of smuggling sand.

The Government has promised compensation for contractors, but as yet no timetable for this compensation package has been set.

For many contractors, particularly smaller companies having to cope with price rises of more than 100 per cent, it cannot come soon enough.

Some contractors told The Straits Times recently that they could not absorb the price hikes for long.

Last week, Singapore Contractors Association president Desmond Hill said compensation should be made progressively, because the survival of the industry depends on a healthy cash flow.

Meanwhile, Mr Mah confirmed yesterday that the seized granite barges have not yet been released.

This is despite recent announcements from Indonesia that it has not banned granite exports to Singapore.

Minister of State for National Development Grace Fu said last week that the Government was sourcing granite from countries like Malaysia, Vietnam and China.

But prices have still increased dramatically, due to the increase in transport and logistics costs, Mr Mah said.

The price of sand has gone up from $25 to $60 per tonne, while that of granite has increased from $25 to $70.

Sand and granite are used to make concrete, the price of which has also shot up from $70 to around $200 per cu m.

The Government has said it will pick up the tab for 75 per cent of the additional costs for public sector contractors, but has not confirmed when these payments will be made.

‘We have an index for how much additional cost is involved and the agencies are now working it out,’ said Mr Mah.

As for the private sector, Mr Mah said the government agencies will try to mediate a solution.

‘I don’t expect, with a disruption like this, that everybody will come out with a perfect solution overnight.

‘But I really hope that all parties concerned, including the developers and contractors, will find a way to resolve this because it’s not in everybody’s interest to see any one party suffer unduly as a result of this.

‘The burden has to be shared more or less equally by all parties concerned,’ he said.

Source : Straits Times - 29 Mar 2007

SINGAPORE must use more sustainable building methods and materials, Minister of State for National Development Grace Fu said yesterday.

‘The recent Indonesian ban on export of concreting sand and the disruption in granite supply serve as timely wake-up calls,’ she said at a Green Mark Seminar organised by the Building and Construction Authority (BCA).

‘Instead of relying on concrete as the main construction materials, we have to make use of alternative materials, including steel, other metals, glass and composites. We should also promote the recycling and re-use of construction materials.’

Besides public sector initiatives in the form of regulations, incentives and funding, other measures will be introduced to help steer the real estate and construction sectors towards higher standards of sustainability, Ms Fu said.

‘We are considering amending the Building Control Act to impose minimum requirements on environmental sustainability that are equivalent to the green mark certified standards for new buildings and existing ones that undergo major retrofitting,’ she said.

Related article: Click here to read the full text of Ms Grace Fu’s speech

While green buildings may cost more, the operating savings during their lifetime more than outweigh the added expense at the start, she said.

Yesterday’s seminar, for professionals from the construction and real estate sectors, was held in conjunction with the launch of BCA’s info-portal to promote Green Mark as the standard for local buildings.

‘We can learn from the experience of countries like the UK, US, Japan, Germany and the Netherlands,’ Ms Fu said.

Local speakers, and others from Japan and the US, took part in the seminar to suggest ways to upgrade Singapore’s building sustainability.

Toshiaki Fujimori, senior counsellor at Japanese architectural and contracting firm Shimizu Corporation, encouraged Singapore to adopt ‘wall-greening’, which involves lowering a building’s temperature by growing plants on the side of it.

Gary Christensen, developer of the Banner Bank Building in Boise, Idaho, said environmentally-friendly buildings make economic sense from a developer’s standpoint even though they cost more to put up.

A green building not only cuts maintenance expenses but raises the productivity of workers housed in it, so going green makes financial sense, he said.

Source : Business Times - 21 Mar 2007

Almost a month on, granite supplies from Indonesia are still not back to normal since several Singapore-bound granite barges were seized by Indonesian authorities on suspicion of smuggling sand.

This is despite recent announcements from Indonesia that there is no ban on granite exports to Singapore, said Minister of State for National Development Grace Fu on the sidelines of a Building and Construction Authority (BCA) Green Mark Seminar yesterday.

Indonesia banned the export of land sand to Singapore last month, citing environmental concerns.

However, the construction industry has been kept supplied with both sand and granite aggregates released from the BCA’s stockpile.

But the sand ban and the disruption in granite shipments have caused severe price hikes, largely due to higher transport and logistics costs, said Ms Fu.

Cost of sand has gone up from $25 to $60 per tonne, while granite has increased from $25 to $70.

Sand and granite are used to make concrete, the price of which has also shot up from $70 to $200 per cu m.

The Government has said it will pick up the tab for 75 per cent of the rise in sand costs, although no payment has been made to public sector projects yet.

‘This is because we are working out the details with other public agencies, and looking into the impact of granite on the cost as well,’ said Ms Fu.

The Government encourages private developers to adopt a similar cost-sharing approach.

Meanwhile, contractors The Straits Times spoke to are fretting over cash-flow problems.

‘Compensation should be given progressively and not later, because cash flow is vital to our industry and affects all parties,’ said Singapore Contractors Association president Desmond Hill.

Addressing these concerns yesterday, Ms Fu said it is ‘not appropriate for the Government to step in and dictate a particular formula on how they should share the cost’.

‘This is an issue everyone will have to play a part in and chip in at this difficult time,’ she said.

But she added that the outlook for the industry remains rosy. Major projects ahead, a strong economy and rising property prices spell good news for it, she added.

In the longer term, the BCA will continue to encourage the industry to adopt more sustainable construction methods using alternative materials and look at recycling construction waste too.

Source : Straits Times - 21 Mar 2007