Report by consultant Davis Langdon suggests excessive demand means prices are set to continue to increase
Major projects in Dubai could be forced back to the drawing board after a study indicated that the spiralling cost of materials would worsen in the next six months.
A report by consultant Davis Langdon has found that the bill for materials in the sheikdom rose by as much as 80% in the 18 months to December 2004.
Steven Coates, the Davis Langdon partner who compiled the report, said that prices had remained level in the past six months but were predicted to rise again by the end of the year.
He said: “We expect a surge in prices in the next six months on prestigious projects, particularly in Dubai, where some contractors are expecting labour and material prices to rise by about 20-30% because of the sheer quantity of projects.”
The price rises have been caused by a surge in demand for skills and materials that has seen the cost of construction in the Gulf increase by up to 60%.
Peter Walichnowski, a former Land Securities director who has set up his own firm, Skylan Properties, said the problem was causing developers to reconsider existing schemes.
We expect a surge in prices in the next six months
Steven Coates, Davis Langdon
He said: “There’s been a rise in construction costs in Dubai and it’s driving up the price of developments. Contractors on fixed-price contracts have been caught by the increasing costs of materials.”
The report also said that Qatar has overtaken Dubai as the region’s construction hotspot, potentially offering even more opportunities for contractors.
It says costs across the board, including construction materials, such as cement, and professional salaries, have risen 35% in Qatar since the beginning of the year, making the situation even worse than in Dubai.
The report added that, because of the perception of regional security problems, shortages of materials were likely to continue.
It concluded: “The bad news for contractors is that continuing cost rises will remain very much a feature of the construction sector in 2005.”