Profit margins are being eroded, and we can only try to mitigate.
Singapore's construction industry is learning to live with a new cost reality — one shaped not by temporary disruption, but by the slow, structural repricing of materials in the wake of Middle East conflict. Steel and concrete prices have climbed and stayed, and the firms that build the city's homes and infrastructure are quietly absorbing the difference, for now. The deeper question is not whether costs have risen, but whether the people and systems bearing that weight can continue to do so — and what happens to housing affordability when they can no longer.
- Steel reinforcement bars and ready-mixed concrete have settled at prices roughly 10% above pre-conflict levels, and industry players no longer expect them to fall back.
- Profit margins at construction firms are being quietly eroded — contractors face suppliers with pricing leverage and limited room to push back.
- Fewer than one in ten active projects have faced delays, and those setbacks are measured in weeks rather than the year-long stalls of the COVID era, suggesting the system is strained but not yet broken.
- Firms are signaling that future tenders will price in the new cost reality, shifting the burden forward even as developers and contractors currently absorb the difference themselves.
- Academics and industry leaders warn that this cushion is temporary — if elevated material and fuel costs persist, upward pressure on housing prices becomes increasingly difficult to avoid.
Singapore's construction sector has arrived at an uncomfortable new normal. The supply chain disruptions triggered by Middle East conflict have eased, but the price increases they unleashed have not. Steel reinforcement bars and ready-mixed concrete are both trading significantly above where they stood before the conflict, and industry figures now treat these levels not as a spike to wait out, but as the new baseline.
For contractors, the pressure is immediate. Firms describe eroding profit margins and limited negotiating power with suppliers. Some are turning to battery storage and electric machinery to reduce diesel costs on worksites. Others are simply absorbing the difference and hoping for a resolution that may not come — or may not bring prices down even if it does.
On active projects, the damage has so far been contained. The Micro Builders Association Singapore reports that the vast majority of residential construction is proceeding without significant delays, and where setbacks have occurred, they are measured in weeks rather than the prolonged stalls that defined the COVID-19 era. Contractors are finding ways to keep working, even in uncomfortable conditions.
The harder reckoning lies ahead. Construction firms are already preparing to price the new cost reality into future tenders. For now, developers and contractors are shielding homebuyers from the full impact — but that arrangement has limits. Real estate economists caution that if material and fuel costs remain elevated, housing prices will eventually follow. How far and how fast depends on how long instability in the Middle East continues to ripple through the world's supply chains.
Singapore's construction industry is settling into what its players now call a permanent state of higher costs. Months after the Middle East conflict sent shockwaves through global supply chains, the disruption has eased—but the price increases have not. Steel reinforcement bars that cost S$637 per tonne in February now run S$704 in May. Ready-mixed concrete climbed from S$130 to S$145.60 per cubic metre over the same span. These are not temporary spikes. They are the new baseline.
The squeeze is immediate and visible in the ledgers of firms large and small. Bruce Peng, executive director at Right Construction, describes the core problem plainly: profit margins are being eroded. For materials where suppliers hold the leverage, contractors have limited room to negotiate. Some firms are investing in battery storage systems and electric machinery to cut diesel consumption on worksites. Others are simply absorbing the difference and hoping the conflict ends soon. But even if it does, Peng believes the inflation baked into material prices will not reverse. The world has moved on. Prices stay where they are.
The impact on active construction projects has been surprisingly muted so far. The Micro Builders Association Singapore, which represents roughly 200 contractors focused mainly on residential housing, reports that fewer than one in ten projects have experienced delays. Those that have faced setbacks are talking in terms of weeks or a month—nothing like the year-and-a-half slowdowns that plagued the industry during COVID-19. Chua Tai Kee, the association's chief assessor, notes that unless material costs spike dramatically enough to make purchasing impossible, contractors find ways to keep working. The current environment, while uncomfortable, has not yet broken the system.
But the real test lies ahead. Construction firms are already signaling that future tender prices will reflect the higher-cost reality. For now, developers and contractors are absorbing much of the increase themselves rather than passing it to homebuyers. It is a temporary cushion. Sing Tien Foo, a real estate professor at the National University of Singapore's Business School, warns that this arrangement cannot hold indefinitely. If material and fuel costs remain elevated, pressure will eventually build. Housing prices will move upward. Whether that happens depends entirely on how long the Middle East remains unstable and how long the world's supply chains remain constrained by the fallout.
Notable Quotes
Our profit margin is being eroded. For certain materials, because we are heavily dependent on suppliers, we can only try to mitigate this price increment.— Bruce Peng, executive director, Right Construction
When material costs increase, you should expect some price pressure, especially on housing prices.— Professor Sing Tien Foo, National University of Singapore Business School
The Hearth Conversation Another angle on the story
Why hasn't the industry simply shifted to different suppliers or materials to escape these prices?
Because the global supply chains for concrete, steel, and fuel are not easily rerouted. When the Middle East conflict disrupted shipping and energy costs, it affected everyone at once. There is no alternative supplier waiting in the wings that is cheaper or faster.
So contractors are just accepting lower profits?
For now, yes. But it is not sustainable. They are hoping the conflict ends and prices normalize. If it does not, they will have to pass the costs forward—either to developers or eventually to the people buying homes.
The data shows only 10 percent of projects delayed. That seems resilient.
It is, compared to what could have happened. But that is partly because contractors are still absorbing the costs. Once they cannot anymore, you will see delays spread. The real test is whether prices stay elevated for years.
What happens to housing affordability if this becomes permanent?
That is the question keeping developers awake. If material costs do not fall, housing prices will have to rise. The math is unavoidable. The only question is timing and how much of the burden each party can bear before something has to give.
Is there any sign the conflict will end soon?
The sources do not say. That uncertainty is itself the problem. Without visibility on when stability returns, firms cannot plan. They can only brace and hope.