Why construction industry is booming in Dubai
The cost of construction in the UAE is lower than most - if not all - developed cities mainly due to intense competition and low wages in the construction industry, a new report reveals.
According to a report by the UK-based construction services firm Turner & Townsend, Dubai has been ranked the 28th expensive place for construction and rated "lukewarm" for tendering conditions, characterised by rising prices and growing competition for projects.
The other two regional markets Muscat and Doha have been rated "cold" due to intense competition among contractors for very little work and reducing cost pressures. The report revealed that the construction costs in the UAE is $1,455 per square metre as compared to $1,337 in Muscat, $2,416 in Doha, $3,900 in New York, $3,736 in San Francisco, $3,652 in Zurich, $3,617 in London and $2,629 in Paris.
The research noted that construction spending in the UAE has been held up by government investment in infrastructure ahead of major global events in the coming years such as Expo 2020 Dubai. This upfront investment by the state is expected to drive private sector development in hotels and leisure facilities ahead of the event.
"Governments across the Middle East are taking active steps to diversify their economies and move away from their reliance on oil. This is a long-term challenge and, for the moment, oil prices remain the most important factor influencing capital investment decisions in the region. As prices return to stable levels and the region prepares for major events such as the Expo 2020 Dubai, both governments and private investors should focus on the opportunity to drive better outcomes from their investment plans," said Alan Talabani, managing director for Middle East at Turner & Townsend.
Atif Rahman, partner and director of Danube Properties, said in 2018, construction costs have gone up slightly and will continue to do so.
"However, compared to other countries, price fluctuation is less in the UAE and that makes our industry more stable. According to the Statistics Centre of Abu Dhabi (SCAD) during March 2018, the average prices of 'Roofing Materials' increased by 9.9 per cent, '(PVC) pipes' by 4.4 per cent and the 'steel' group increased by 0.6 per cent, compared with February 2018. During March 2018 the average price of diesel decreased by 2.4 per cent, and concrete decreased by 1.8 per cent compared with February 2018. During March 2018 the average price of the 'wires for apartments' increased by 27 per cent, wires for small building by 16.9 per cent compared with March 2017. During March 2018, the average prices of paints decreased by 1 per cent and concrete decreased by 0.7 per cent compared with March 2017."
Going forward, Rahman sees that by and large the construction market will remain stable with 2-3 per cent fluctuation.
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