Labour shortage seen looming in UAE construction

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(Bloomberg)

(Bloomberg)

Construction costs in parts of the Gulf region are on the rise and closing in on prices in Western and Northern Europe, according to the 2012 International Construction Costs Report by EC Harris.

The global built asset consultancy said costs in both Qatar and the UAE were substantially higher than in Saudi Arabia.

EC Harris said Saudi Arabia had witnessed a 10 percent rise in construction costs in the past year as the Gulf kingdom's spending on major infrastructure projects takes off.

The report added that the construction boom in Saudi Arabia and Qatar could lead to a growing demand for cheap labour from Asian nations - resulting in a shortage in the UAE.

This could result in an escalation of construction prices in the UAE, the region's other major construction market, EC Harris said.

The annual study, which benchmarks building costs in 53 countries across the globe, found that construction costs were acting as a reliable bellwether for global economic trends.

Switzerland continued to top the list however even there costs have dropped 10 percent on the previous 12 months due to the declining value of the Swiss Franc.

Conversely, construction costs in markets that have been less impacted by the global recession are continuing to increase with countries like Canada, Australia and Qatar all moving up the league table compared with their 2011 position.

The Asia-Pacific region now has four of the top 10 most expensive markets with Australia Japan, Hong Kong and Singapore occupying third, fourth, sixth and seventh place respectively.

Canada also figured in the top ten list, jumping two places from last year with construction costs on average 14 percent higher than in 2011.

Mathew Riley, group head of Cost and Commercial at EC Harris said: “Those countries that are least constrained by debt problems are continuing to invest in construction activities to help fuel their continued growth.

"In markets like Qatar and Canada where capital investment has been focused on long-term infrastructure projects, there will be a sustained pipeline of work which is likely to see construction costs rise even further on both a short and medium term basis."

The findings also showed the price of building in New Zealand, Japan and Australia had risen by 13 percent, seven percent and 20 percent respectively as each market had to rebuild major parts of the country following the devastation created in 2011 by an earthquake, tsunami and major floods.

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