A construction project
Saudi Arabia's construction sector witnessed a gradual recovery this year, with growth forecasted at 2.9%, according to Colliers’ August 2021 report.
The Public Investment Fund's (PIF) injection of investments worth SAR 150 billion annually in the local economy to support new projects until 2025, coupled with long-term economic diversification plans within the framework of Vision 2030, will likely provide an impetus to the Kingdom's construction sector.
The significant increase in commodity prices, started from Q4 2020, came as a result of the global economic recovery, supply chains backlog, and improved growth prospects. The volatility of commodity prices caused some challenges for developers and contractors.
The challenges included difficulties in evaluating future projects and dealing with previously awarded long-term contracts, the report said, noting that despite this Q2 2021 witnessed a gradual return to normalcy.
The following table shows the variation in raw materials prices in Q2 2021 compared to Q2 2020:
|
Variation in Material Prices in Q2 2021 |
|
|
Material |
Variation (%) |
|
Electrical Cables |
+37% |
|
Steel Rebars |
+31% |
|
Timber |
+31% |
|
Concrete Blocks |
+20% |
|
Ready-Mix Concrete |
+13% |
|
Cement |
+8% |
|
Sand |
+7% |
The medium to long-term effects will be largely influenced by the efforts to control the pandemic globally and locally. A downward correction is expected in the prices of global commodities, and therefore, in the region's building materials with the pandemic receding and the return of the global economy to normalcy.
Regarding construction costs in Saudi Arabia in Q3 2021, Colliers expects that the cost of a square meter in a villa with medium specifications will reach SAR 3,963 and that in an apartment in a low to medium-rise building with medium specifications to reach SAR 4,035.
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