A new report from construction industry cost tracker MEED Cost Indices has revealed that construction costs in the UAE will fall in 2012 due to the unexpected slowdown in the country's projects market in 2011.
MCI forecasts that construction costs in the UAE will fall by 1.3% in 2012. The drop is the result of a fall in demand for construction materials due to a contraction in the UAE project market which witnessed 52% slump in the value of contracts awarded in 2011 compared to 2010.
MCI predicts however that prices will rise again in 2013 as projects originally planned for 2011 are re launched in 2012, confidence returns to the global economy and finance for projects becomes more readily available.
MCI has been developed by Middle East business information service, MEED, following requests from construction companies, consultants and project developers for more reliable information on construction costs and trends. It provides an independent construction cost analysis and forecasting tool based on historical costs and forward looking market projections.
The index provides companies involved in the construction and development of projects in the UAE with 5 year forecast of costs, enabling them to mitigate the risks of price volatility.
Mr Emil RademeyerGM of MCI said that "MEED Cost Indices' is an essential decision making reference tool for all key stakeholders associated with construction projects throughout the Middle East and is the latest example of MEED's expert knowledge of industry data and market research.”
Mr Mr Rob Edgecombe director of Rider Levett Bucknall said that the industry has been in need of an independent cost index for a number of years."
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% from 2001 until its peak in early 2009. But it shows that prices have fallen about 28% since 2009 following the global financial crisis and the subsequent downturn in the UAE real estate market.
Mr Richard Thompson editor of MEED said that "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. So, the message to potential investors and developers of UAE projects is that 2012 is a good year to start building again."
