Dubai: There’s at least some relief for developers — the cost to build in Dubai and Doha is among the lowest in the world, according to a benchmark construction cost index. That key building materials are available in sufficient quantities and at relatively low prices are what is helping keep costs from running away.
“The region’s major commercial centres of Doha and Dubai remain — for the time being, at least — relatively stable locations for developers, benefiting from access to inexpensive labour and energy,” said Ian Williamson, Buildings Global Business Leader at the consultancy Arcadis, which brought out the index.
“Throughout 2015, the global construction market saw the overall level of cost inflation restricted due to the drops in commodity prices. Particularly when it comes to oil, growing uncertainty over prices will inevitably have a short to medium term impact on the GCC construction industry.”
At least for the near term, the lower cost of development will prove favourable for Gulf governments pushing ahead with major projects. Dubai has the Expo 2020 infrastructure and venue build-up progressing, while over the next 10 years, Doha could run up a bill of $150 billion on roads, railways, stadiums and ports, as well as hospitality and social infrastructure.
Qatar also has plans for further investment in transport infrastructure, water and electricity by 2020.
New York, London and Hong Kong occupy the top positions in terms of construction costs in the index, which looked at trends across 44 key cities. Dubai was ranked 18th, while Doha came in 12th and Jeddah in 16th.
“It is fair to say that we have another challenging year in prospect for the construction industry. With the steep fall in the price of oil, the timing of investment programmes across the Middle East has become uncertain,” said Williamson.
“Declining commodity prices, low labour rates and a highly competitive Middle East construction market have given rise to more potential opportunities across newly-affordable markets. It is a good time for government, funders and developers to capitalise on their investment ambitions.” Apart from the worry over current oil prices, GCC economies — and its real estate and construction sectors — will also have to be on their guard against external shocks.
‘Dubai receives a lot of investment cash from other oil economies, which will have also been affected by the commodity price crash,’ according to the Arcadis report. ‘A strong dollar also makes both tourism and property investment more expensive for key Asian investors.
‘The strength of currencies tied to the US dollar will inevitably have long-term impacts on construction markets in the Gulf Cooperation Council (GCC) countries.’