Qatar ‘most costly GCC country’ for construction

Qatar ‘most costly GCC country’ for construction

According to an annual report released by EC Harris, an ARCADIS company and global built asset consultancy firm, Qatar is the most expensive GCC country for construction.

The ARCADIS International Construction Cost report scales building costs in 43 countries globally. The study revealed that currency fluctuations and commodity prices, coupled with an increasing demand for development in many recovering economies, have affected construction costs over the last 12 months.

While Qatar is less impacted by fluctuations in global currencies, as market constraints are driving inflation and price movements, according to Terry Tommason, partner and head of property at EC Harris, “Investment on social infrastructure, economic diversification investment and event-driven construction are three key trends positively influencing construction spend in the region.”

Despite high levels of investment in transport infrastructure, in the Gulf region, costs continue to be fairly moderate, for example the $200bn GCC rail network, and all-embracing event-led construction the for World Cup bid in Qatar and Dubai’s 2020 World Expo.

Ongoing instability in the Middle East however, along with dwindling oil prices could yet impact on spending.

Tommason continued: “Qatar is best placed to be able to continue to fund budget commitments, but with oil trading dropping below $50/barrel this month, it is possible that current and capital spending priorities may come under review.”

The top ten most expensive countries for construction in 2014 are:

  1. Switzerland
  2. Denmark
  3. Hong Kong
  4. Sweden
  5. Australia
  6. France
  7. Austria
  8. UK
  9. Germany
  10. Belgium

While Qatar (16) tops the GCC region as the most expensive country for construction, Switzerland heads the list. The UAE sits at 19th, just ahead of Saudi Arabia in 20th spot. No other GCC country makes the list.

In contrast to last year’s index and excluding Hong Kong (3rd) and Australia (5th), European countries control the top ten, owing in part, to the ongoing economic recovery in the likes of Germany and France, which is seeing contractors demanding more for their services.

With currency depreciation in many emerging markets, relative costs have dropped considerably in these areas, with costs in the likes of India, Indonesia, Malaysia, Thailand and Vietnam around 35% less that of the UK.

The study also offered some global highlights.

Construction in the Eurozone has been heavily impacted by the ongoing financial crisis and it could be a lengthy period before the industry in many bordering economies recover to levels seen pre-2008. Furthermore, while optimism about the prospects for the Eurozone waning, poor results for a number of key countries in the second and third quarters of the year have underlined the fragility of the recovery. Caution should be adopted for those operating or looking to invest within the sector.

In North America, overall, the construction sector enjoyed a similar recovery in 2014 as in 2013, with the continuing improvement of the housing market along with a shale gas extraction and the unconventional oil and minerals boom in the USA and Canada. All of which make for a more buoyant construction market. Generally, demand is on the up and with costs reducing for energy-intensive manufacturers, the industrial sector has seen significant growth. High demand for residential property in central locations means that large developers, who traditionally focused on the over-built office market, are switching to high-end residential in pursuit of profitable development opportunities.

China has seen a gradual shift to a consumption-based economy, which means that the vast growth in construction over the last ten years is unlikely to continue in the long term. Elsewhere in Asia, construction markets had another strong year, particularly in Japan, where the stimulus associated with one of the three ‘arrows’ of Abenomics has had a significant impact. Hong Kong and Singapore also saw strong growth throughout the year, driven by a combination of robust housing markets and high levels of infrastructure spend.

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