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Weakened commodity demand pushes down build costs

UAE and Qatar still among world's 20 most expensive markets

NEWS, Business, Construction costs, EC Harris, Qatar, Saudi Arabia, Uae

Hong Kong has been named the most expensive country in the world with regards to construction costs - followed by Switzerland, Denmark and Sweden, according to a new report.

EC Harris's annual International Construction Costs survey found that construction costs across the world were generally helped by falling costs of commodities as growth in emerging markets has slowed.

"However, some forecasters have called the end of the ‘commodities super cycle’ and claim that commodities have already entered a sustained period of below-trend price growth," the survey argued. "This development will be of huge importance for low cost construction economies, where material costs are a more significant component of project costs."

In the Middle East, the survey pointed to a general shift in spending on social infrastructure, adding that there were "increasing signs of a general recovery in construction markets".

Saudi Arabia was the 21st most expensive market in the world as it increases spending on social housing with 1.65m new homes needed by 2015.

"From a resource perspective, Saudi Arabia suffers from high levels of unemployment, so labour shouldn’t be a problem.

"However measures to reduce the use of expatriate labour may create constraints in the short term as local labour
sources are more widely used." It predicts that around 180,000 labourers have left the country as Nitaqat rules to boost Saudi representation in the private sector are enforced.

The UAE was named as the 20th most-expensive market as it began to rebound from a severe construction slump in 2008 as GDP grew by 4% and property prices improved.

"However, given the legacy of oversupply and failed investment prior to 2008, it is early days for a construction recovery in the UAE," the report said.

It pointed to flagship projects such as the Mohammed Bin Rashid City in Dubai and the museums being built at Saadiyat Island in Abu Dhabi as further signs of recovery, alongside the restarting of several stalled property schemes.

Qatar, meanwhile, has retained its place as the GCC's most expensive construction market at 15th overall, just one position behind the UK.

Progress on non-government projects has been "relatively slow" to date, with developers waiting until infrastructure improvements are in place.

Moreover, although there appears to be capacity in terms of the supply chain, contractor expertise and some imported materials could be in short supply as major transport projects such as the new Doha Metro and the Doha Expressway start on site.

"Currently prices are stable, but have the potential to ramp up quickly if procurement is not accelerated
and additional capacity built over the next two years," it warns.

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Construction Week - Issue 758
Feb 08, 2020