The construction costs in Qatar remain the highest in the Middle East, followed by the regional heavyweights the UAE and Saudi Arabia, according to an annual report released by EC Harris, an Arcadis company and global built asset consultancy firm.

The Arcadis International Construction Cost study, which benchmarks building costs in 43 countries across the globe, 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.

With Gulf currencies closely tracking the US dollar, the impact of these fluctuations on the GCC countries has been limited, stated the report.

“The Gulf region is less impacted by fluctuations in global currencies as market constraints are driving inflation and price movements,” said Terry Tommason, partner and head of property at EC Harris.

“Investment on social infrastructure, economic diversification investment and event-driven construction are three key trends positively influencing construction spend in the region,” he stated.

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.

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

The top 10 most costly countries for construction in 2014 are Switzerland, Demark, Hong Kong, Sweden, Australia, France, Austria, UK, Germany and Belgium, while the least costly ones are Czech Republic, Brunei, Philippines, Bulgaria, Thailand, Malaysia, Indonesia, Taiwan, Vietnam and India, said the report by EC Harris.

Globally, 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 10. 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 per cent less than that of the UK, stated the report.

According to EC Harris, 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, it added.-TradeArabia News Service