Dubai still a relatively cheap place to build, says Arcadis

While material prices might be higher, labour costs in Dubai are ‘60 per cent or less’ than in London. Sarah Dea / The National

Government and private sector clients have an opportunity to commission new buildings at bargain rates, according to Arcadis.

The company’s latest International Construction Costs 2016 report states that Dubai remains a relatively cheap place to build. It is ranked 18th worldwide in a list of 44 major cities, meaning it is less expensive than cities in Qatar (Doha is 12th) and Saudi Arabia (Jeddah, 16th).

Moreover, Ian Williamson, the head of the company’s Middle East buildings division, argued that the cost of building is likely to remain extremely competitive throughout this year.

“I think it’s a great year to buy if you’re a client,” said Mr Williamson. “It’s a shame there are issues on liquidity and funding because it’s a very good time to be doing capital investment.

“With the market being tighter, all contractors and consultants are fishing in a smaller pool for work right across Qatar, KSA and the UAE, which represents 90 per cent of most people’s business in the Middle East.”

The International Construction Costs report stated that the cost of building globally has generally been in decline over the past 12 months as a result of falling commodity prices. Crude oil, iron ore and nickel dropped in price by between 30 and 50 per cent last year, while copper and aluminium have fallen by between 20 and 25 per cent.

This presents challenges for GCC markets, where declining oil revenues lead to constrained government budgets and lower infrastructure spending.

And although oil only makes up about 2 per cent of Dubai’s GDP, its role as the region’s business hub is affected by the fact that investment cash from oil-producing countries such as Russia and Iran also falls away.

The report added that the strong dollar (to which the dirham is pegged) has made tourism and property investment more expensive for key Asian investors.

Mr Williamson said that labour costs in Dubai are typically “60 per cent or less” than rates in London. Although materials prices can be 20 to 30 per cent higher as a result of import costs, the competitive market in the region means it is a good time to procure building work.

“With the market being tighter, contractors and consultants are fishing in a smaller pool for work right across Qatar, KSA and the UAE, which represents 90 per cent of most people’s business in the Middle East,” said Mr Williamson.

“I think with that tightening market, you’re starting to see highly competitive pricing put in. People are having to work to lower margins to maintain volumes.”

The city with the world’s highest building costs is New York, followed by London and then Hong Kong. Of the 44 cities in the Arcadis report, Taipei was the cheapest city in which to build, followed by Bangalore and Bangkok.

A report published by Colliers in October stated that construction costs in the UAE had remained flat in 2015, with the lower price of steel offset by an increase in the cost of aggregates, sand, glass and other materials.

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