Construction Special Report: Gulf project costs fall

17 July 2009

As construction companies’ confidence in the Dubai real estate market has drained away over the past six months, so the average price of construction materials in the UAE has dropped.

An analysis of cement, concrete, steel and aggregate costs across the Gulf and Lebanon reveals that the biggest recorded price drop is for a 50 kilogramme bag of cement in the UAE, the price of which fell to $4.10 a bag in June, compared with a price of $6.80 a bag in December, a 39.7 per cent drop.

This raises the question for both construction clients and contractors of whether or not there will be further price drops for construction materials.

Data from UK-based construction cost consultant Davis Langdon shows a mixed picture. While prices for cement, ready-mix concrete, aggregate and diesel have all fallen in Qatar and the UAE since March, prices for the same materials in Saudi Arabia remain stable. And in Lebanon, where a post-election construction boom is expected, prices for some materials such as reinforcement steel bars have risen by 7 per cent to $590 a tonne.

Contractors may be hopeful for a post-Ramadan renaissance of projects being put out to tender in late September, but the most likely effect of this mixed pricing environment is that clients will continue to hold off on making major contract awards in the Gulf this year.

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