By Andy Sambidge
Consultants EC Harris says tender inflation could hit 4.3% next year, 5% in 2013
Tender inflation in the UAE has decreased by 1.5 percent during the first nine months of 2011 and is expected to remain at the same level for the rest of the year, according to consultancy EC Harris.
Its latest Market View Report, which tracks tender prices in the UAE property and infrastructure sectors, has revealed that the falling costs of commodities across the globe is taking the pressure off tender prices across the country.
The report said that while commodity prices have shown huge volatility over the past year, the price of rubber, steel beams, copper and crude oil have all decreased over the past three months falling by 10 percent, two percent, eight percent and two percent respectively.
Nick Smith, head of Cost & Commercial Management for EC Harris in the Middle East, said: "In the final months of the year contractors across the UAE will be under less pressure from rising commodity prices.
"However, there will still be a focus on cutting costs to provide the extremely competitive rates that have been prevalent in the market in recent time and which have suppressed the whole effect of material price increases."
With the market expected to show little improvement during the fourth quarter of 2011, material prices and construction labour rates are likely to remain flat, EC Harris added.
However, the EC Harris report predicts the market will pick-up over the next couple of years with tender prices forecasted to increase by up to 4.3 percent in 2012 and then exhibit a steady five percent growth throughout 2013 and 2014.
"With material prices expected to rise once more next year, clients and contractors alike should begin to plan ahead and consider a purchasing strategy that will enable them to enter 2012 in as strong a position as possible," said Smith.
"Whilst the price of commodities including rubber, aluminium and tin remain comparatively low, there is a real window to effectively spend to save," he added.
In a report published in July, EC Harris said Bahrain was the Middle East's most expensive country to build and appears in a top 20 of the most expensive countries across the world.
According to the annual International Construction Cost Report, the price of construction in Bahrain is on a par with the UK.
Building in Bahrain is six percent more costly than in Qatar, their closest Middle East neighbour on the list.
Qatar was ranked 15th overall with construction costs more expensive than the likes of the US, Russia and China.
The UAE completed the top three of the most expensive countries in the Middle East, with construction costs nine percent cheaper than in Bahrain.
Oman was ranked fourth in the region with construction costs that were 11 percent below the baseline figures set by Bahrain and the UK.
Saudi Arabia emerged as the cheapest country in the Middle East when it comes to construction, finishing 17 places below Oman and in 37th place overall.
The figures revealed that it was almost half as expensive to build in Saudi Arabia as in Bahrain while the kingdom was 37 percent and 34 percent cheaper when compared to Qatar and the UAE.For all the latest construction news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.