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Building materials in Saudi Arabia may have gotten pricier recently, but the overall cost of construction in the kingdom will likely decline for the rest of the year on the back of the slowdown caused by the coronavirus outbreak, according to the latest analysis.
Since the onset of the pandemic, fewer projects have been launched in the Gulf state and contractors have been facing much stiffer competition. The lack of new projects, coupled with stiff competition among builders, will put pressure on the pricing for new tenders, Colliers International noted in a report.
“From now to the end of 2020, the overall cost of construction for new tenders should not increase, and when compared to the fourth quarter of 2019, we predict that construction costs will reduce by more than three percent, due to a diminished pipeline of work and increased competition,” Colliers said.
Challenges
The construction industry in the Gulf Cooperation Council (GCC) region has been facing significant challenges since the global lockdown.
Delivery of materials, as well as work completion, has been delayed and hardly any new projects have been launched.
Despite the slowdown, the price of construction materials went up recently, particularly between the second quarter of 2019 and second quarter of 2020.
“There has been a slight increase in pricing for some key construction materials,” Colliers said.
“Precautionary measures relating to COVID-19, affecting productivity and logistics, has impacted global market supply chains putting an upward pressure on costs,” said Colliers.
Key construction materials like timber, block work and concrete have all posted price increases at 3 percent, 6 percent and 4 percent, respectively.
Construction costs
For the remainder of the year, Colliers said the overall building costs should drop.
Construction of villas should be in the range of 1,922 to 2,405 Saudi riyals per square metre for projects with commercial specification. For villas with “medium high specification,” the cost can be between 3,762 to 4,650 riyals per square metre.
As for low to medium rise apartments with commercial specification, the costs can be anywhere between 2,375 and 2,975 riyals per square metre, while high-rise flats with high specification can cost between 4,851 and 5,978.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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