Saudi Arabia is the third most expensive GCC country for construction, according to the annual report released by EC Harris, an ARCADIS company and global built asset consultancy firm.

The ARCADIS International Construction Cost study benchmarks building costs in 43 countries across the globe and found that relative construction costs have been affected by currency fluctuations, commodity prices and increasing demand for development in many recovering economies throughout the year. “Similar to neighboring markets, Saudi Arabia is less impacted by fluctuations in global currencies and market constraints are driving inflation and price movements,” said Hisham Malaika, head of KSA property at EC Harris.

“Key trends that have a positive influence on construction spend include the continuation of investment on social infrastructure, investment in economic diversification and event-driven construction.”

In the Gulf region, costs remain relatively modest, despite high levels of investment in transport infrastructure, such as the $200 billion GCC rail network, and extensive event-led construction in the shape of Qatar’s successful World Cup bid and Dubai’s 2020 World Expo. What remains to be seen is what impact the ongoing instability in the Middle East and recent weakness in oil prices will have on spending plans and, consequentially, pricing.

Malaika continues: “Saudi Arabia along with Qatar and Abu Dhabi are among the best placed to be able to continue to fund budget commitments, but with oil trading hovering around $50/barrel this month, it is possible that current and capital spending priorities may come under review.”

Switzerland is the most expensive country in the world for construction while Japan and Singapore have seen significant relative cost reductions over the last year.

In contrast to last year’s index, European countries dominate the top ten.

This is due, in part, to the ongoing economic recovery in the likes of Germany and France which is gradually translating into contractors demanding more for their services.

Meanwhile, currency devaluation in many emerging markets means that relative costs have dropped considerably in these areas. Costs in the likes of India, Indonesia, Malaysia, Thailand and Vietnam are now around 35 percent less that of the UK.
 
GLOBAL HIGHLIGHTS

Europe

The ongoing crisis in the Eurozone impacted heavily on the construction sector and it could be a long time before the industry in many peripheral economies rallies to anything like the levels seen pre-2008. Furthermore, while optimism about the prospects for the Eurozone waning, poor results for a number of key countries in the second and third quarters of the year have underlined the fragility of the recovery. Caution should be adopted for those operating or looking to invest within the sector.
 
North America

Overall, the construction sector in the region has enjoyed a similar recovery in 2014 as in 2013. The robust housing market recovery continues to blossom as do shale gas extraction and the unconventional oil and minerals boom in the US and Canada, all of which make for a more buoyant construction market. Overall demand is on the up and with costs reducing for energy-intensive manufacturers, the industrial sector has seen significant growth. High demand for residential property in central locations means that we are seeing large developers, who traditionally focused on the over-built office market, switching to high-end residential in pursuit of profitable development opportunities.
 
Asia

In China, the gradual shift to a consumption-based economy means that the huge growth in construction that we have witnessed over the last ten years is unlikely to continue in the long term. Elsewhere in Asia, construction markets had another strong year, particularly in Japan, where the stimulus associated with one of the three ‘arrows’ of Abenomics has had a significant impact. Hong Kong and Singapore also saw strong growth throughout the year, driven by a combination of robust housing markets and high levels of infrastructure spend.