KSA must "balance budget" to cope with COVID-19 impact

Colliers International said in its KSA report that the number of past forecasted projects to be awarded will drop

Saudi Arabia's Qiddiya gigaproject spans 334km2.
Saudi Arabia's Qiddiya gigaproject spans 334km2.

In its recent KSA Construction Costs Update report, real estate company Colliers International stated that a future budget balance is likely to moderate planned spending across Saudi Arabia's construction industry until COVID-19 is under control and oil prices regain an upward trend towards a sustainable level.

Market outlook

Stating that the KSA construction market will be negatively impacted, Colliers International said in its report that the number of previously forecasted projects to be awarded will drop, particularly in the private sector.

This hold on or suspension of projects will continue in an event of the pandemic extending through Q4 2020, the report suggested.

Cost of construction

Between the period from Q2 2019 to Q2 2020, there has been a slight increase in pricing for some key construction materials in the region, the report indicated. These include timber, block work, marble tile, alumnium, sand, concrete, rebar, and cement.

The prescribed precautionary measures relating to COVID-19 in the kingdom, affecting productivity and logistics, has in turn impacted global material supply chains, placing an upward pressure on costs.

Inflation outlook

From now to the end of 2020, the overall cost of construction for new tenders should not increase, the report dictated. Furthermore, Colliers International has predicted that construction costs will reduce by more than 3% in comparison to Q4 2019, due to a decline in the pipeline of work and increased competition.

Saudi Arabia's construction sector is currently working on several gigaprojects including The Red Sea Development Project, Qiddiya, Amaala, Riyadh Metro, and Diriyah among others. 

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