US property consultant Colliers International warns that construction costs in the UAE could start to rise over the next two years as global commodity prices increase, value added tax (VAT) is introduced, and subsidies are removed.

“Weakening global construction commodity pricing over the past two years has given a much needed buffer to the industry. However, going forward commodities including crude oil, aluminium, iron ore and copper are predicted to gradually rise. This combined with fuel/subsidy cuts and the introduction of value added tax (VAT) in January 2018, will put upward pressure on construction costs for the next two years,” says Colliers in its January 2017 Abu Dhabi and Dubai Construction Cost Benchmarking report.

The report also highlights the severity of the cashflow crisis that is facing many construction companies operating in the UAE: “The single biggest issue for UAE contractors and sub-contractors at present is cashflow. Sustained delays in payment should not be viewed as a problem solely for the construction companies, it needs to be acknowledged as an issue that affects the industry as a whole, including stakeholders. Widespread cashflow issues negatively impact the industry’s ability to deliver quality projects within budget and on time.”