KUALA LUMPUR: Turner & Townsend expects an approximate 3.0 per cent increase in Malaysia's construction tender price inflation (TPI) over the previous year.
The growth rate may vary depending on factors such as project type, industry, procurement strategy, and currency fluctuations, it said in its first Malaysia Market Intelligence Report.
The firm noted that the competitive tendering environment in Malaysia is evident, as reflected in the government's Budget 2024 announcement allocating RM90 billion for crucial development and infrastructure projects nationwide.
"In anticipation of this, the Construction Industry Development Board's (CIDB) licensed contractor registrations from G1 to G7 have surged since 2020.
"Interestingly, the numbers of G7 contractors, the highest grade in company capability, reached a four-year peak as of June 2023, as organisations with greater financial capacity hedged their bets on a rise in demand," it said.
Turner & Townsend said the forecast complements the stability of national interest rates, which have been maintained at 3 per cent since January 2024, giving businesses greater confidence to invest.
"Overall construction activity has seen a considerable post-pandemic rebound and has been driven to its highest levels since 2019, according to the Bursa Malaysia construction index," it added.
Furthermore, Turner & Townsend said that although essential construction materials such as aggregates, sand, and concrete are still facing upward price pressures, the frequency of incremental price rises has decreased.
"The uptake in projects allows 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," it said.
The company highlighted that significant challenges such as the depreciation of the ringgit, increasing construction overheads, and a shortage of skilled labour could affect the capacity of delivery partners.
"Apart from larger contractors with considerable financial strength, the majority of small to medium-scale contractors and vendors are likely to be more selective with their order books, exercising greater caution and due diligence around commercial risks," it noted.