Material costs impeding UAE construction despite strength in workloads

RICS Global Construction Monitor Q1 2022

• 79% of respondents single out material costs to be impeding construction activity
  
• Workloads are expected to rise for year ahead, but mainly driven by private residential projects
  
• Financial constraints and increased competition set to impact future workloads
  

There’s continued strong activity across the UAE construction market despite rising concerns over the cost and availability of materials, according to the latest RICS Global Construction Monitor for Q1 2022.

Looking at the all-sector level, +25% of respondents reported a rise in workloads this quarter - one of the few countries to display growth from the previous quarter - up from +19% in Q4 2021. Workloads are mainly being driven by a continued focus on private residential projects, as 28% more respondents reported a rise. Respondents also highlighted a firm commitment to agribusiness infrastructure as almost a third (+29%) reported a rise in workloads in this subsector.

However, despite the strength in current workloads the impact of global supply chain shortages is impeding activity across UAE. Indeed, this quarter +79% of respondents reported that material costs are a major constraint to current activity, 12% lower than the global average. Also, access to those materials is only reported to be an issue by 59% of respondents.

Elsewhere, financial constraints and competition doesn’t seem to be improving for the UAE construction sector. As almost three quarters of respondents continue to report these as an issue slowing down activity.

Despite the current challenges, respondents still remain optimistic for the coming year ahead, and are one of the few countries to see an increase in expectations for profit margins. The net balance this quarter increased to +26% up from +21% in Q4 2021 and is the strongest growth since records began. The current private residential projects and pipeline is set to sustain the UAE construction sector as 54% more contributors anticipate a rise in workloads for the year ahead. 

RICS Chief Economist, Simon Rubinsohn, commented: “The good news in the latest report is that the industry remains positive about the outlook for activity and that the generally upbeat mood can be seen not just in regard of infrastructure and housing development but also in the commercial sector. However, it is clear that the sector faces significant challenges which have been reflected in recent official data showing a sharp rise in vacancies across the construction industry. RICS numbers demonstrate these shortages are pretty much across the board including quantity surveyors and project managers as well as both skilled trades and more general labour. This, combined with problems around accessing building materials in the current environment, is exerting significant upward pressure on construction costs at the present time.”

-ENDS-

Notes for editors:

Contributor quotes:

“High oil prices, inflation, shortage of some kind of materials and lack of specialists in some areas.” - Abu Dhabi

“Material and labour costs have increased drastically which has increased the construction costs.” - Abu Dhabi

“World rise in oil prices affecting this region as well.” - Abu Dhabi

“Material cost is increasing, and availability is very limited. Taxes are increased. Mobilization.” - Dubai

“End of the pandemic.” -Dubai

“Russia Ukraine war has indirect effect, while recovery from prevailing pandemic is still slower.” - Dubai

“Demand to control cost and delay in payments affecting the business.” - Dubai

“Global supply chain issues.” - Dubai

“Extreme competition is becoming unhealthy and depleting the margins and salaries for professional.” - Dubai

“Commodity price volatility.” - Dubai

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