Construction costs seen to rise on strong demand

MANILA, Philippines — Prices of construction materials, particularly cement, are expected to rise due to strong demand from the public and private sectors and the imposition of tariff on imports, real estate services firm KMC Savills said.

In a briefing, KMC Savills research manager Fredrick Rara said prices of construction materials increased last year due to demand from both public and private construction.

He said demand for construction materials are seen to rise again this year as both the public and private sector are implementing projects.

The government, in particular, is implementing infrastructure projects under the Build Build Build program.

Rara said the country’s top developers have also committed a capital expenditure of P700 billion to P800 billion this year for projects.

“Demand for construction materials will definitely rise by 2019. If we talk about cement tariffs, it will exacerbate the problem,” he said.

Last month, the Department of Trade and Industry said it  would be imposing a provisional safeguard duty of P210 per metric ton of imported cement in the form of a cash bond for a period of 200 days, as cement imports have surged and caused injury to domestic players.

While the provisional tariff is in place, the Tariff Commission is conducting a formal investigation on whether there is a need to impose definitive safeguard duty on imported cement to protect the local industry.

While the cement tariff is negligible for now, Rara said imposing it permanently and over a longer period of time is a concern.

“Just a quick research on what is happening on the industry and if we look at how our clients, sectors will be affected eventually, it’s rather alarming if it is more permanent. But if it is just 2019 or maybe on 2020, the market can still absorb it but, you know, we do the numbers not on a two-to-three-year period. We go for 10 to 25 years. And if it happens like a 10-year tariff, it will pretty much affect the overall returns for a certain a project,” he said.

For his part, KMC Savills managing director Michael McCullough said the tariff would increase prices and typically, reduce the demand for cement.

“Luckily, Filipino consumers are fairly healthy and dynamic, and again, in short-term, we think they can absorb this cost,” he said.