Last year, persistent factors such as rising inflation, supply chain constraints, and elevated freight costs posed significant challenges as investors and the market adjusted to the external environment, with no indication of prices reducing to pre-pandemic levels.

However, there is now a glimmer of hope, as the escalation rate appears to be de-escalating, with the dust settling on manufacturing backlog, logistics and supply chain disruptions.

According to our International construction market survey 2023, peak construction cost escalation may have passed. However, costs will likely remain high, considerably impacting projects and programmes worldwide irrespective of demand conditions.

While crucial construction materials like aggregates, sand and concrete continue to experience upward price pressures, the frequency of incremental increases has reduced. The uptake in projects allow for some flexibility to accommodate price revisions.

Rebar and cement, on the other hand, remain volatile in price, yet a discernible easing has been observed compared to previous fluctuations. This can be attributed to a decline in the prices of essential global commodities, such as iron ore and steel.

Holistically, tender prices continue to be on an upward trajectory, albeit at a less rapid rate of increase. Projections for 2024 anticipate general tender prices to grow at approximately 3.0 percent compared to the previous year. This growth may vary depending on factors such as project type, industry, procurement strategy and currency fluctuations.

The already warm tendering conditions in the Malaysian market in 2023 is expected to grow warmer in 2024. This is evident from the government’s Budget 2024 announcement with an allocation of MYR90bn for key development and infrastructure projects across the country. In anticipation of this, CIDB’s licensed contractor registrations from G1 to G7 has surged since 2020. Interestingly, the numbers of G7 contractors, the highest grade in company capability reached a four-year peak as in of June 2023, as organisations with greater financial capacity hedge their bets on a rise in demand.

Key challenges such as the weakening ringgit, rising construction overheads, and shortage of skilled labour may impact the bench strength of delivery partners. Apart from larger contractors with considerable financial strength, the majority of small to medium-scale contractor and vendors are likely to be more selective with their order books, exercising greater caution and due diligence around commercial risks.