Developers hit by material price hikes

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The rising cost of building materials could send Middle East property prices soaring, according to Saudi Arabia based property developer Rakaa.

A series of steep hikes in the cost of core building materials such as steel and cement, along with skyrocketing oil prices could have "huge financial implications" in the coming months, according to Rakaa Property CEO Dr Abdulrahman Al Tassan.

"The property boom in the UAE has resulted in an acute shortage of both building materials and manpower, leading to a big spurt in prices across the Middle East," he claimed.

The markets for cement and steel have been hit hardest, with cement climbing from AED260 to AED290 and AED300 over a series of months.

The price of steel has risen to AED3050 per ton, an increase of 27% within just two months, according to Al Tassan.

He cited experts who have suggested the price of oil, which has hit record highs over the past 12 months, has acted as a catalyst.

It has recently become more expensive to power factories producing the materials, causing manufacturers to up prices to keep profit margins stable.

Al Tassan went on to say that the steady increase of fuel prices not only affects the production of materials, but also their transportation.

Higher freight charges and increased marina insurance fees have been implemented on imported goods, as the cost of transport rises in tandem with fuel, he warned.

Dr Al Tassan cited the region's mass construction as the cause of the price hike.

"This can be attributed to market forces such and demand and supply following the flurry of new multi-billion mega projects which fuel the demand for construction materials, to cover the projects from local suppliers."

"Sometimes the developer has to book the materials several months before delivery," he claimed.

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