This article first appeared in The Edge Malaysia Weekly on June 1, 2026 - June 7, 2026

Property developers may soon have to grapple with a sharper rise in construction costs amid inflationary pressures stemming from the Middle East conflict. Higher fuel prices and escalating building material costs are expected to weigh on the sector.

Paramount Corp Bhd (KL:PARAMON), for example, has flagged a 3% to 5% price hike for new property launches. Construction costs, including building materials and fuel, account for up to 50% of its total development costs.

At the same time, Sime Darby Property Bhd (KL:SIMEPROP) is set to reassess its RM4 billion sales target at its upcoming mid-year review. The group has recorded annual sales of more than RM4 billion over the past two years.

Persistent cost pressures, however, could place developers in a difficult position. While they may attempt to adjust pricing strategies and recalibrate project pipelines, passing on higher costs to homebuyers could hurt affordability and dampen demand, especially in the mid-market segment.

Profit margins may also be slimmer if intense market competition limits the ability of developers to fully transfer the additional costs to homebuyers.

Any prolonged weakness in the property market would likely have a ripple effect on the construction industry, potentially leading to project delays and renegotiation of construction contracts as developers adopt a more cautious approach to project execution.

The property sector has benefited from the strong post-pandemic pent-up demand over the past few years, with total transaction value surging to RM241.87 billion in 2025 — the highest in more than a decade.

Looking ahead, the ability of property developers to strike a balance between pricing strategies and buyer affordability will be put to the test.

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