In the near term, SJ Group expects upward pressure on global oil prices, leading to higher fuel costs for plant and machinery, particularly in the piling and excavation trades. Rising freight and logistics costs are also expected to increase the cost of imported materials into Singapore, it adds.
Overall construction costs for a typical residential project in Singapore could increase by around 2% to 4%, warns SJ Group. Prices of key construction materials, such as concrete, reinforcement, mechanical and electrical (M&E) equipment and architectural finishes, could rise by 20%.
“A prolonged closure of the Strait of Hormuz is likely to sustain elevated global oil prices, thereby increasing domestic energy costs and adding inflationary pressure across the broader Singapore economy,” reads SJ Group’s report.
Singapore a net importer
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Singapore is heavily dependent on imported energy. About 95% of the country’s electricity is generated using imported natural gas, according to the Energy Market Authority (EMA).
In 2025, the city-state’s gas imports comprised 43% piped natural gas from Malaysia and Indonesia and 57% liquefied natural gas (LNG) sourced globally, according to EMA data. The city-state imported 6.04 million tonnes of LNG in 2025, with close to 47%, or 2.83 million tonnes, originating from Qatar, according to Global Trade Tracker data.
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Owing to Singapore “being a big importer of goods”, the country’s construction sector “will be impacted in a couple of ways”, says Steve Raye, director at global construction consultancy firm Linesight.
One immediate impact is delays to project timelines as shipping disruptions create bottlenecks for imported materials and equipment. “Programme or project schedule delay is one impact we are seeing because lots of goods are imported through [the] Middle East area. There’s a significant backlog at the moment in terms of shipping,” he says in an interview with City & Country.
Beyond delays, shipping disruptions could also drive up construction costs as freight prices and commodity prices rise.
In addition, major carriers are avoiding the Red Sea and the Strait of Hormuz, rerouting via the Cape of Good Hope, which is increasing pressure on global supply chain flows.
Raye says materials like steel could face further price increases if supply disruptions persist. “With steel, raw material cost forms only part of the final price. Global overcapacity continues to exert downward pressure on steel prices overall, though rising fuel and energy costs are pushing production costs higher. At the same time, shipping represents a meaningful share of the total price, so if higher freight costs and tighter supply continue, it can push landed costs up even when mill prices are stable,” adds Raye.
SJ Group notes that aluminium and copper prices have become increasingly volatile due to supply-demand imbalances and energy-related pressures, raising cost risks for imported M&E equipment and aluminium products used in projects in Singapore.
A prolonged conflict — similar to the Russia-Ukraine war — could further worsen global supply shortages, while a weaker Singapore dollar against the US dollar may place additional upward pressure on imported construction costs, further exacerbating inflationary pressures, says SJ Group.
Cost pressures are already emerging. The Building and Construction Authority’s (BCA) Tender Price Index rose 1.01% y-o-y to 139.1 in 2025, from 137.7 in 2024, signalling continued upward pressure on contractor pricing. This index reflects the tender price level of contracts and takes into account material and labour costs, as well as elements of competition, risk and profit.
Cement prices have also risen more than 13% between 1Q2025 and 1Q2026, according to SJ Group.
Bulk purchase to cut costs
Raye says firms are increasingly scrutinising project schedules and sourcing strategies to mitigate disruptions, particularly for large-scale developments reliant on imported components.
The construction sector is already adapting to persistent supply chain uncertainty, with developers and contractors exploring bulk-purchasing strategies to mitigate risks, according to Raye.
Some large multinational data centre operators are increasingly bulk-buying standardised components ahead of project deployment.
“What we’re seeing clients do is bulk purchase standard components. They don’t necessarily know which project will go on, whether it is a US, European or Asian project, but they know that this is a standard project product that can be utilised in most designs. Rather than having that issue of repeated long lead time, they bulk buy [the components], potentially store them until needed and that reduces risks,” he adds.
Robust construction pipeline
Despite rising costs, Singapore’s construction pipeline remains robust.
BCA has maintained its 2026 construction demand forecast at between $47 billion and $53 billion.
Major projects in the pipeline include the expansion of Marina Bay Sands, redevelopment works at HarbourFront Centre, Changi Airport Terminal 5, multiple data centre developments and a steady pipeline of public housing projects.
Residential construction demand is expected to remain resilient, supported by approximately 19,600 Build-to-Order flats slated for launch in 2026 and an increase in private residential supply from the government land sales (GLS) programme.
The 14 land parcels on the Confirmed List and six parcels on the Reserved List under the 1H2026 GLS programme are expected to yield more than 9,000 private homes in 1H2026.
Ho Kong Mo, senior executive director for project and cost management at SJ Group, says in a statement accompanying the report: “Even as global uncertainties drive cost pressures, a steady pipeline of public sector projects and continued infrastructure investment will underpin demand. Additionally, the Building and Construction Authority announced a shift from mandatory overseas skills testing to local testing in Singapore, starting progressively from January 2027, to ease prevailing constraints in the foreign worker market — thereby shortening the hiring timeline by approximately two to three months.”
Ho adds: “Strengthening project management and accelerating productivity through technology adoption will enable the industry to manage costs, navigate current headwinds and support long-term growth.”
