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Sun 8 Feb 2009 11:21 AM

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Construction costs fall by 70% amid global downturn

Costs have fallen from $326 per sqft six months ago to $95 per sqft - industry insiders.

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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mohammed 10 years ago

I think thats the correct cost. Now the cost has reached the actuals compared to the infalted figures that has been charged till now by the contractors and the developers. Now we hope to see the rents coming down too:)

Joe 10 years ago

Its only a developers market for those developers that have a secure line of credit or cash/assets. At present there are many developers using what they have already trying to keep from bankruptcy. There is no point expanding if there is little or no demand.

George 10 years ago

How much did the overheads fall? Visas, other government fees, rent (labour camps, staff accommodation, office space), diesel, construction machinery rental, etc? It's not only about the materials.

MFT 10 years ago

Here we go again......another round of speculations...numbers are there without rattionilzation? Can someone please explain to me how the math works.....as I see it, cost / sq ft = Materilas cost + Direct labor cost + Overheads + Profit. The Raw materials have not dropped 70% and the labor certainly has not dropped as much....so overhead & profit have drop more than 40% ( after taking into acoount of materilas drop)? I seriousely doubt it...

UK 10 years ago

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?

mustafa 10 years ago

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.

BNK 10 years ago

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.

MH 10 years ago

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.

Carb Florin Andrei 9 years ago

Many of the problems stated here can be solved by: Building strategic partnerships- Dynamic, and repeated negotiations Everything depends on the terms set out above. Logistic Manager WWBI www.worldwbi.com