clock 25-06-2021
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SHAREDA: Spike in Logistic Cost Will Burden House Prices

In response to a report yesterday that the sea freight charges from China to Kota Kinabalu has increased by nearly 300% on a year-to-year basis, Datuk Chua Soon Ping, the President of Sabah Housing & Real Estate Developers Association (SHAREDA) opined that it will dampen the developer’s effort to keep house prices down.

According to the news report, the costs for a container from Guangzhou China to Kota Kinabalu has increased from approximately US$800 in 2019 to US$2,200 this year. And the trend is likely to continue into next year.

“The increase in freight charges will further burden the already increasing cost of building materials. As such the construction industry will be adversely affected, and it will eventually result in a higher house price to the consumer” says Datuk Chua.

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Rising cost of construction

Since the pandemic, the development and construction industry has been badly hit by the rapid increase in cost of materials. Taking steel bar as an example, which is a key material for high rise buildings, it has seen price jumped by 25% from RM2,180 (Jan,2020) to RM2,900 (Mar,2021).

The price surge in materials and logistic are adding pressure to an industry that is already burdened by the unexcepted costs brought on by the pandemic.

“The impact is more profound especially on developers who are building affordable housing, as they face much higher risk as a result of the rising building cost.”

“SHAREDA and its members are constantly finding ways to make houses more affordable in Sabah, unfortunately, incidents like these are making such effort an uphill battle.”

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Time to grow local manufacturing

“With the absence of options in Sabah, the construction industry relies heavily on imports of goods and material, and we will always be exposed to the risk of price fluctuation in the macro-environment, including currency”

“The only way to reduce our exposure is to increase local manufacturing as well as to optimize the supply chain of all construction materials, removing the unnecessary middleman in the process,” says Datuk Chua.

“Our state government has done the right thing by banning the export of scrap iron early this month. We hope the government will encourage the manufacturing of materials locally in order to reduce our reliance in imported good in the long term.”

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