KINIBIZ Will the fuel subsidy cut and labour shortage from the crackdown on undocumented foreign workers really increase the cost of constructing houses by up to 10 percent, as claimed by developers?

Technically the developers are correct as “up to 10 percent” can be anywhere from 1 to 10 percent.

But the economics of the matter are more complex than a straight transference of the 10 percent fuel cost increase to a certain percentage of property price increase, said Eddy Wong, managing director of DTZ, which is part of UGL Services, a division of UGL Ltd.

“One side of the argument is that the price components of a property comprise not just construction costs, but also land cost, finance cost, consultants’ fees etc, the last few which should not be directly impacted by the fuel price increase,” said Wong.

“The other side of the argument is that the 10 percent fuel price increase will have a multiplier effect, meaning it is not just the direct cost of transportation that has increased, but the other components that are impacted by it - building materials will be more expensive as a result of the increased transportation costs and so on.”

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