Residential developers are rushing to lock in construction material prices through upfront cash payments and bulk purchase agreements, while optimising logistics for cost efficiency ahead of further increases driven by surging oil prices.
Pairoj Wattanavarodom, managing director of SET-listed developer Eastern Star Real Estate, said the company will review material and construction costs every quarter, increase the frequency of price monitoring, and systematically categorise materials most exposed to rising energy costs.
Materials heavily reliant on transport will be closely tracked, with advance procurement planned to mitigate logistics cost pressures, he noted.
Meanwhile, energy-sensitive materials will be grouped and assessed through scenario planning to enable more precise price negotiations.
"For new projects, we will negotiate with contractors to hold prices steady, while ensuring timely payments," said Mr Pairoj. "We are also offering cash payments to suppliers to lock in material prices before further increases in line with rising oil costs."
Despite having secured construction material price contracts with suppliers for up to three years, the company is strengthening logistics planning by increasing bulk deliveries to project sites.
Materials were previously delivered in line with sales of 2-3 units. Now orders are consolidated and delivered in larger volumes as sales increase.
"Many suppliers have received orders from large developers and agreed to lock in prices, but deliveries have yet to be called due to project delays," Mr Pairoj said. "We are offering upfront cash payments to secure these materials at favourable prices from the inventory that large developers have already frozen."
He said these strategies will help to mitigate the negative impact of rising oil prices by controlling costs, preserving margins, and limiting pressure on residential unit prices.
Daranee Chatphiriyaphan, chief executive of SET-listed L.P.N. Development, said that while ongoing conflicts prompt foreign relocation to safer destinations, they also pose downside risks by increasing development costs.
"Higher oil prices are driving up transport and production costs for many construction materials, leading to price adjustments. Effective construction management has become an urgent strategy to cope with the current situation," she said.
To minimise the impact of rising construction costs and manage risks from inflation and price volatility, the company locked in prices for multiple construction materials through to the end of 2026, covering around 70% of the projects it plans to develop this year.
The remaining 30% is still under negotiation. This approach helps ensure cost stability and allows the company to maintain selling prices for many projects, despite an upward trend in costs, said Ms Daranee.
In general, the development cost of its condo projects comprises construction and operating costs.
While operating costs remain unaffected, construction costs account for half of total development costs, with the other half attributed to land.
"For low-rise housing projects, which are built progressively in line with sales, some portions may be affected by rising costs. We will need to absorb part of this, as we cannot fully pass it on to buyers," Ms Daranee said.
