UAE construction costs unlikely to rise for 18 months

The cost of construction projects across the UAE and Oman is not likely to increase at all over the next 12 months, while prices in Doha are only expected to rise marginally as demand has been sapped by declining government spending, according to a new study.

Cost consultancy Turner & Townsend’s International Construction Market survey said that the UAE and Oman were two of only three global markets (the other being Beijing) that are not expected to increase this year. Globally, construction costs are predicted to rise by an average of 3.4 per cent in 2016, slowing from 4.3 per cent last year.

It said prices in the UAE would also remain flat in 2017.

“Expected low cash availability is driving concerns that the coming two years will be challenging for the UAE economy,” the report said.

Despite this, it added that authorities will encourage more private sector participation in schemes to continue developing infrastructure, and that Dubai has defied the rest of the market by continuing with a series of ambitious projects.

Muscat, meanwhile, is undergoing “a year of austerity” in 2016, which has been reflected in weak consumer confidence and a lack of demand for residential property.

“The next two years will be challenging given the level of cash fluidity,” the report said.

“Nevertheless, the Omani government’s ninth five-year plan (running from 2016-2020) has set out major investment plans in key sectors such as manufacturing, transportation, tourism and mining, with over 500 programmes and policies to commence.”

In Qatar, meanwhile, construction costs are expected to increase by 1-2 per cent this year. It has a large backlog of ongoing work, even if tenders for new projects have fallen away in recent months. Demand is expected to pick up again as soon as commodity prices recover so that projects can complete in time for the Fifa 2022 World Cup.

The world’s most expensive construction markets are Zurich, New York and London, although the tech sector-dominated cities of Seattle and San Francisco are catching up.

“Two macroeconomic factors – the sharp fall in oil prices and China’s slowdown – have rippled across the global construction industry over the past year and triggered a rapid polarisation,” said Steve McGukin, the managing director of Turner & Townsend’s real estate business.

“Some regions are now facing acute overstretch, with construction demand outstripping what the industry is able to supply. Meanwhile, in markets with a heavy reliance on either trade with China or on commodities exports, both demand and levels of investment have fallen.”

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