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Analysis: Counting the costs

by Yamurai Zendera on Nov 24, 2013

A high price to pay: Qatar is the most expensive Middle East construction market.
A high price to pay: Qatar is the most expensive Middle East construction market.

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Qatar ranks as the most costly Middle East location to build in, according to EC Harris’ ninth annual ‘International Constructions Costs’ report. The rankings were based on comparison of average costs in Euros of 21 building types, relative to the UK.

The FIFA World Cup 2022 hosts were 15th on a list 47 countries, bookended by Hong Kong in first place and India in last place. Regionally, it was followed by the UAE (20) and Saudi Arabia (21).

The report predicts that real GDP in 2014 in Qatar and Saudi Arabia, unlike the UAE, will be slightly down on last year at 5% and 4.3% respectively. The UAE is expected to rise from around 3% in 2013 to 3.7% in 2014.

EC Harris says that in the medium term, global construction is expected to show substantial growth in most markets, which will create continuing challenges around resource allocation and certainty of delivery.

It puts the GCC alongside the likes of the United States and parts of Europe that have started the process of recovery after the 2008 crash; however the global economy is still vulnerable to slowdowns in emerging economies such as China and India, and the West and Japan are still highly dependent on high levels of stimulus.

In any case, the volume of global construction output is predicted to grow by 70% in real terms to $15tn by 2025, the report says.

As for the GCC itself, there are increasing signs of a more general recovery of construction markets but challenges in controlling costs loom large.

Qatar’s construction market, although traditionally very small, is about to change with a set of major programmes linked to the 2030 National Plan and Fifa World Cup 2022; while investments have already been seen in social infrastructure, transport and energy infrastructure to support economic diversification, population growth and major global events.

For instance, contracts have now been awarded for phase one of the flagship Doha Metro project, which encompasses - Red Line North (RLN), Red Line South (RLS), the Green Line (GRN) and the Major Stations - Msheireb and Education City.

EC Harris says Qatar’s resource and cost challenge will be related to the speed of proposed developments, and more so when you consider that Kuwait Financial Centre Markaz estimates that 30 highway projects are going to be awarded to build adequate roads for hosting the World Cup. EC Harris points to the challenge of procuring skilled construction professionals and some imported minerals mainly due to the current state of transport infrastructure.