Saudi construction material costs remain stable in Q3: Colliers

Prices for key construction materials in Saudi Arabia remained stable overall in the third quarter (Q3) of 2019 compared to the same period last year, Colliers International noted in a new report on Tuesday.

The cost of construction materials such as timber, block work, marble tile, and aluminium declined 0.7, 2, 3, and 3 percent respectively, for the period Q3 2018 to Q3 2019, noted the report ‘Saudi Arabia Construction Costs Update’.

On the other hand, prices of sand, concrete, rebar and cement rose 3, 3, 1.5 and 4 percent respectively during the same period, according to Colliers.

“Construction materials represent on average 60 percent of overall construction costs, therefore stable material costs have a large baring on reducing overall construction cost inflation,” Bob Flanagan, Managing Director, Project Management & Cost Consultancy Services, Colliers International MENA, told Argaam.

He added that the other main factors to affect construction cost inflation are labor, overheads and profits.

However, he also said, profit levels did not generally increase as contractors remained competitive over this period.

The largest factor influencing inflation was the cost of labor due to the Nitaqat program, he stated.

According to Colliers’ report, the Nitaqat program is achieving its goal which is to increase the demand for the Saudi workforce.

“However, this coupled with a shortage of skilled and semi-skilled construction workers, is contributing to an overall rise in labor costs,” it maintained.

Overall, Colliers noted that the Saudi construction industry is anticipating growth and the outlook appears promising from 2020 onwards, mainly driven by the increase of government spending and a growing population.

“Government backed giga-projects such as Neom, Qiddiya Entertainment City, The Red Sea Project etc., as well as Social Housing schemes are expected to boost construction activity in the coming years,” Colliers noted, while predicting that construction cost inflation will average at 3.2 percent over the next 12 months.