The construction industry across the Middle East is bracing for hefty cost increases in the wake of sweeping new trade tariffs announced by Donald Trump this week, an industry report said.
Construction cost increases in the UAE are forecast to be in the range of 2.7 to 3.3 per cent, while those in Saudi Arabia are expected to be higher, ranging from 3.4 to 7 per cent, according to Stonehaven’s newly released 2025 UAE and Saudi Arabia Construction Cost Benchmarking Report.
Stonehaven, however, cautioned that its projected cost hike figures may be conservative as markets react to global stock losses and supply chain disruptions, which are forecast to increase the prices for imported materials in the region.
UAE, Saudi construction cost forecasts
“With over $2.3 trillion in active projects across both countries, the GCC region is heavily exposed to international commodity pricing. As key materials such as steel, concrete, and aluminum become more expensive to source, the cost of construction is expected to surge over the next 18–24 months,” the report said.
Gordon Rodger, Managing Director at Stonehaven, described the forecast as a stark wake-up call for the entire industry.
“We’re facing a perfect storm – labour shortages, outdated processes, and increasing external pressures like global trade tariffs. Developers need to act fast to lock in construction costs that align with their feasibility studies, or they risk serious impacts to their bottom line,” he said.
The report said its projected cost inflation figures for the GCC, including the 2–5 per cent for the UAE and 3.4–7 per cent for Saudi Arabia, may rise further due to global trade disruptions.
Stonehaven said the region is also facing serious labour challenges – labour accounts for up to 40 per cent of project costs – and called for automation and AI adoption to mitigate the challenges.
Modular construction, AI-powered planning, and BIM technologies are key to managing project costs and risk, it said.
According to the report, while Dubai is estimated to add 19,700 villas in 2025, giga-projects like NEOM and The Red Sea Project are reshaping the Saudi landscape.
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