Construction costs fall by 70% amid global downturn

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COSTS FALL: Construction costs have dropped 70% in six months. (Getty Images)

Construction costs in Dubai have fallen by more than 70 percent from their peak in August last year, it was reported on Sunday by industry insiders.

The news follows media reports that developers are in the process of renegotiating contracts to take advantage of drops in the price of raw materials, prompted by the global economic crisis.

Previous esitmates had out the fall at 30 percent but according to UAE daily Emirates Business costs have now fallen by 70.83 percent, from AED1,200 ($326) per sqft six months ago, to around AED350 ($95) per sqft now.

"The cost has gone down to between AED400 and AED600 per sqft with some areas going as low as AED350,” said Imad Al Jamal, of the UAE Contractors Association.  

“We are only talking about core and shell and not looking at the finishes," he added.

Meanwhile, Matt Cronje, chief development officer at Schon Properties, revealed he was in the process of negotiating a new deal at the lower price.

"We are looking at construction prices ranging between Dh270 and AED300 per sqft in general. It is now a developer's market," he added.

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READERS' COMMENTS

Building costs in Europe
Posted by MH, Dubai, UAE on Monday 9 February 2009 at 15:38 UAE time


I concur with BNK.
Putting aside the difference in quality, in Europe ballpark numbers for construction are usually around 1000 Euro/sqm or roughly 500 AED/sqft. This includes a healthy margin for the developer.
With existing taxes, cost of labour, cost of materials, etc, in Europe, the costs in the UAE can never be more than 200-300 AED/sqft.

I'm keen on buying a place in Dubai eventually as we intend to stay for a while, but not before averages prices have come down to levels in line with that.

Construction Cost????
Posted by BNK, dxb on Monday 9 February 2009 at 13:15 UAE time


another wrong statistics from a reputable organisation.

I worked (since 2 weeks back) in real estate for a long time and in uae for last 19 years. the figures quoted by the gentleman is completely wrong.

even at the peak of the boom (aug 08) the construction cost, I repeat 'construction cost' was never more than AED.300.00 per SFT of built up area, if you convert this to sellable, roughly AED600.00 per SFT.

I don't understand what all these gentlemen want to do by feeding the market with the wrong figure, worng picture etc., wake up guys there are people still left in uae who knows the construction industry and can understand the market. Pls don't try to inflate and give worng info. to the public.

Cost of construction
Posted by mustafa on Sunday 8 February 2009 at 17:31 UAE time


Now it is real, before it was all blotted let along price of property or construction,
Now this is the time for RERA to come out with a law and implement to all the Developer to adjust the price of their property according to cost construction at present, because all the developer who are developing at present or their project under construction are renegotiating with the construction company,
so certainly the development will cost much cheaper, so in this case the benefit should go to the buyer because they are the one who has taken a risk of buying property at the pick of the market and this way the cost of property will come down and we can have the
End user buying, it will be big boost to real state market as well as whole economy.

When will the end users benefited?
Posted by UK on Sunday 8 February 2009 at 16:27 UAE time


Generaly developers have a clause in the contract with contractors that in case of cost reductions, they will have to pay less to contractors. Hopefully all the developers must invoke this clause and would pay less but will this low cost also benefit the end buyers which include investors but also include upper middle class individuals? or again the benefit of low cost be divided between two riches i.e developers and contractors?

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