Saudi construction cost growth held in August, with labor and operated machinery the hottest lines

Saudi construction cost growth held steady in August, though the underlying pressure is uneven. The construction cost index rose 2.3% y-o-y and barely moved from July, according to recent data (pdf) from the General Authority for Statistics. Residential costs were up 2.1% and non-residential 2.6%, with the increases stacked in labor and equipment, while most materials held near 2%.

The strain is concentrated in specific inputs. Skilled labor, specialist subcontractors, working capital, and long-lead equipment are the main constraints for contractors, Adnan Jan, an independent executive advisor on strategy and commercial performance, tells EnterpriseAM. “I would describe the pressure as selective rather than across the whole market.”

The breakdown: On the residential side, increases are spread across labor and equipment, with wages up 5.1%, machinery hired with an operator up 5.6%, and bare rental up 4.1%. Non-residential is narrower and steeper on kit — operated machinery jumped 7.2% and rentals 5.8%, while labor there rose just 2%.

Materials were more contained. Basic materials costs rose just 1.8% in both segments, with metal products up 2% on the residential side and timber and joinery 2.1% on the non-residential side. Energy prices rose 3.0%.

And their delivery times improved in August. The risk that lingers sits in imported specialist equipment and materials, where the geopolitical backdrop has raised logistics and procurement risks, Jan says.

REMEMBER- Saudi contracting awards fell by half in value in August even as the project count rose. August awards totaled SAR 4.9 bn across 13 projects, down from July’s SAR 9.8 bn across 11.