Building costs soar, but Mah Sing limits increase to 10pc

KUALA LUMPUR: Rising building material prices are putting pressure on property developers to protect profit margins without pricing homebuyers out of the market, as industry players grapple with reported increases of 20 per cent to 30 per cent in selected construction inputs.

However, the impact on overall project costs varies depending on the materials used, their contribution to total construction expenses and developers' ability to negotiate competitive procurement terms, according to Mah Sing Group Bhd founder and group managing director Tan Sri Leong Hoy Kum.

Leong said the group's overall construction costs had increased by an estimated 5.0 per cent to 10 per cent, significantly below the reported price hikes for certain building materials.

He attributed this to the group's emphasis on value engineering, economies of scale and long-standing supplier relationships, which help it manage expenses while maintaining its product positioning.

The approach is particularly important as Mah Sing continues to focus on homes priced between RM300,000 and RM700,000, with selected offerings extending to RM800,000, catering to buyers seeking affordability without compromising on quality.

Leong said the reported 20 per cent to 30 per cent increase in building material prices over the past year was a general industry estimate and did not reflect the group's own experience.

"Some materials may have experienced significant price hikes, but their actual contribution to total construction costs could be relatively small," he told Business Times on the sidelines of the opening of the M Mira sales gallery in Setapak, recently.

He said a sharp increase in the price of an individual material did not necessarily translate into a comparable rise in a project's overall construction budget, as the impact depended on its share of total costs.

Materials such as cement, steel and sand form part of the construction cost structure, but their respective contributions vary across projects.

Materials with a relatively small cost base, for instance, could record steep percentage increases without significantly changing the overall construction bill, Leong said.

To manage these pressures, Mah Sing incorporates value engineering from the initial design stage, enabling its teams to optimise layouts, specifications and construction methods while maintaining the intended product quality.

"We practise value engineering from day one, ensuring that our designs are planned efficiently to manage costs," he said.

The group also draws on its established supplier network and long-standing relationships to secure competitive terms.

As a large customer, Mah Sing benefits from purchasing scale and its reputation as a reliable payer, strengthening its bargaining position with suppliers, Leong said.

He added that several departments worked together to monitor expenses and maintain tight control over project budgets, allowing the group to identify potential cost pressures early and manage them throughout the development process.

The distinction between individual material price movements and overall construction costs is increasingly important for developers, particularly those targeting first-time homebuyers and middle-income households, where affordability remains a key consideration.

According to the Real Estate and Housing Developers' Association (Rehda) Malaysia, construction costs rose by an average of 13 per cent in the first half of 2026.

Rehda president Datuk Zaini Yusoff said earthworks and infrastructure costs had increased by between 20 per cent and 30 per cent, while normal building works recorded increases of 3.0 per cent to 5.0 per cent.

The divergent cost movements highlight the uneven pressure across different construction components, with developers having to contend with higher expenses in specific areas while managing overall project budgets.

Olive Tree Property Consultants founder and chief executive officer Samuel Tan said developers faced a difficult balancing act as higher construction costs threatened to erode margins, while passing the increases on to buyers risked weakening demand.

Developers must therefore manage both their cost structures and selling prices to keep projects commercially viable, he told Business Times when contacted.

For Mah Sing, Leong said maintaining cost discipline was central to preserving its position in the mass-market and mid-market residential segments.

He said the group's focus on homes priced between RM300,000 and RM700,000 reflects its strategy of catering to buyers seeking relatively affordable properties, while retaining flexibility to offer selected units priced up to RM800,000.

"The group's ability to contain construction cost increases below the reported industry material price movements could provide some buffer against cost volatility, although the extent of the benefit will depend on future material prices, labour costs and the requirements of individual projects."

Looking ahead to 2027, Leong said Mah Sing would remain focused on its existing property development strategy, with cost management and affordability continuing to guide its growth plans amid an evolving construction cost environment.