Earlier this year in February, the Government announced the Singapore Green Plan 2030 during the Budget 2021 speech. Under this new initiative, the Singapore Green Building Masterplan (SGBMP) focuses on sustainability in the built environment. As end consumers, we as investors should be concerned with the costs involved in the construction of Green Buildings.
What Is A Green Building?
Green Buildings are constructed with eco-friendly materials and are energy efficient. In short, the carbon footprints for green buildings are much lower as compared to normal ones. For a building to be considered green, it has to be certified under the Building and Construction Authority’s (BCA) Green Mark scheme.
Singapore’s Direction Towards Going Green
Former Minister of Transport Ong Ye Kung recently announced Singapore’s plan to cease new registrations of diesel cars and taxis by 2025. Singapore is also encouraging the adoption of Electric Vehicles (EV) by targeting to have 60,000 charging points across the country by 2030.
Given the Government’s strong track record, it is likely that these goals will be achieved. If you are a long term investor, it may be wise to take note of Singapore’s direction as it may present some opportunities in the future.
Three Key Targets Of “80-80-80 in 2030” Under SGBMP
Under the Singapore Green Building Masterplan, the three targets set forth are:
- Stepping up the pace to green 80% of our buildings by 2030
- 80% of new developments by GFA to be Super Low Energy (SLE) buildings from 2030
- Achieving 80% improvement in energy efficiency for best-in-class green buildings by 2030
The Impact Of Going Green On Consumers
With all the focus on green buildings, it raises the question of whether it will result in higher construction costs. It is only a matter of time before every developer will have to adopt green initiatives. Hence, does it cost more to construct green buildings and should investors be prepared for developers to pass on these costs?
From our findings, going green does not necessarily cost more. In the past, the costs could be an additional 5% but with technological advancements, the difference is negligible. For example, LED lights cost the same or even cheaper compared to a normal light bulb yet it is much more energy-efficient. As such, people will opt for LED lights due to the cost savings it provides in the long run. Thus, this will likely be the scenario moving forward whereby there will be no additional costs to go green.
However, in the short term, there might still be additional costs incurred to go green although it is unlikely to exceed 5% of the construction cost. It is important to note that a 5% increase in construction cost does not translate to a 5% increase in the sale price. Hence, even if construction cost increases, consumers will not see any significant increase in overall price.
On the contrary, there will be more incentive to go green. With a higher energy efficiency level, there will be more ongoing cost-savings in terms of the monthly maintenance of the building. This will result in a win-win situation where the end consumers pay less in terms of utilities and MCST fees.
What Influences Construction Cost?
The biggest factor that influences construction cost is manpower. This can be seen in other countries where the hourly wages for construction workers are much higher as compared to Singapore. As such, it is much more expensive for developers to construct a building overseas.
The increase in manpower cost has also been evident during the COVID-19 pandemic, due to the Government introducing new dormitory guidelines. With lesser workers per dormitory allowed, there is an indirect increase in manpower cost which translates to a higher construction cost.
However, it is unlikely that construction costs will go up significantly. In Singapore, investors are more concerned about land costs than construction costs.
The Singapore Green Building Masterplan is definitely a good initiative by the Government. However, more needs to be done to facilitate businesses and individuals to encourage the adoption of more green practices. This will help to push the entire nation to work together and achieve the goals set out by 2030.
As investors, there is no need to be concerned about construction costs increasing due to developers going green. In the long term, it may even be more cost-efficient to adopt green practices. Consumers will also benefit from these green initiatives as they enjoy the cost savings from ongoing monthly expenses. Therefore, for the country to achieve the target of going green by 2030, more work needs to go into educating and incentivising the people to work towards achieving a greener Singapore.