Soaring construction costs in Dubai

The prices of building materials are expected to rise by approximately five per cent during the third quarter of 2008 due to record oil prices, rising freight overheads and soaring demand.

Danube Building Materials said on Monday the prices will continue rising until oil prices drop and more freight shipments will be available, although who they think they are kidding is unclear. Construction costs will continue to rise, regardless of the price of oil.

Rizwan Sajan, chairman of Danube, said incessant growth in prices of investment properties will have huge financial implications on the local construction industry.

“We anticipate that the real estate and construction industry will feel a significant impact of the rocketing oil prices and the rising freight costs in the coming months, considering the massive projects that are being launched,” Rizwan said in a press statement.

Earlier this year, prices rose between 10 to 15 per cent, triggered by higher freight charges due to local fuel hike, restrictions on log cutting by countries like Malaysia, Indonesia and Burma, depreciation of the US dollar and high local demand.

One of the construction products with the highest price increase was steel, which doubled from $700 per ton in January to $1,500 per ton in July.

Costs of wood products such as timber and film-faced plywood also climbed by at least 25 per cent during the past three months, with the latter now costing around Dh130 per piece, up from Dh105 a few months ago.

Fortunately, labor is still cheap in Dubai, and it is unlikely that any western labor practices will be introduced in the near future, thus keeping construction costs to a minimum. Singapore is facing a similar issue and have just relaxed their own labor laws to take advantage of foreign labor pools. Singapore property – construction cost crisis.