UAE construction costs set to fall in 2012

New cost tracker index says prices have fallen by 28% from peak in early 2009
UAE construction costs set to fall in 2012
Construction costs in the UAE are forecast to fall due to the slowdown in the countrys projects market
By Andy Sambidge
Tue 31 Jan 2012 06:21 PM

Construction costs in the UAE are set to fall this year due to the unexpected slowdown in the country's projects market in 2011, a new report said on Tuesday.

The construction industry cost tracker MEED Cost Indices (MCI) forecasts that construction costs in the UAE will fall by 1.3 percent in 2012.

It said the drop is the result of a fall in demand for construction materials due to a contraction in the UAE project market, which witnessed a 52 percent slump in the value of contracts awarded last year compared to 2010.

The index also predicts that prices will rise again in 2013 as projects originally planned for 2011 are relaunched in 2012, alongside confidence returning to the global economy and finance for projects becoming more readily available.

The rapid growth of the construction sector in the Middle East from 2002 to 2009 had a huge impact on the price of raw materials.

MCI indicates that the cost of construction rose by 90 percent from 2001 until its peak in early 2009.

But it also shows that prices have fallen about 28 percent since 2009 following the global financial crisis and the subsequent downturn in the UAE real estate market.

The index provides an independent construction cost analysis and forecasting tool based on historical costs and forward-looking market projections.

"The MCI data shows that construction costs in the UAE have fallen to similar levels to those seen in 2006, but will start to climb again next year," says MEED editor Richard Thompson.

"So, the message to potential investors and developers of UAE projects is that 2012 is a good year to start building again."

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