Qatar is still the most expensive country to build in across Middle East

by  — 9 September 2013

Qatar remains the most expensive country to build in across the Middle East according a recently released report.

According to the 2013 International Construction Costs Report released today by global built asset consultancy EC Harris, Qatar retains its position of the most expensive country to build in, from last year. Globally, it ranks 15th among the most expensive countries.

Nick Smith, head of cost and commercial, Middle East at EC Harris, explained that Qatar’s past construction market has been relatively small and historically associated with a steady rate of development. But due to the recent infrastructure, transportation and energy projects linked to the World Cup 2022 and the 2030 National Vision, Qatar has experienced somewhat of a construction boom.

In previous reports EC Harris warned of high inflation rates from what they predicted would be a peak workload period in Qatar, between 2016 and 2019 by as much as 18 percent. “These programmes have got off to a slow start,” said Smith, “so as yet there is little price escalation in the system. This could change as programme procurement accelerates unless steps are taken to further build industry capacity in local and regional markets.”

Currently prices are stable, but have the potential to ramp up quickly if procurement is not accelerated and additional capacity built over the next two years.

Infrastructure related plans make up the bulk of large projects, meaning that much of the capital investment forecasted for the next decade will be through government entities and some quasi-governmental entities . The report states that while there are a significant commercial and residential projects under development with private investors, “a large portion of the non-hydrocarbon investment is being funded to a small number of key stakeholders, including Qatar Foundation (Education City and Msheireb Properties); Qatari Diar (Doha Convention Centre, Lusail and others); Barwa (various commercial and residential developments); KAHRAMAA (water and power), Qatar Rail Company (Metro, National Rail and LRT) and Ashghal (roads and public works).

Progress is relatively slow in non-government driven projects, states the report, with developers preferring to hold back from development in commercial schemes until the infrastructure is in place. There is also the issue of oversupply in commercial space, with a total of approximately 3.6 million square metres of office space and more than 30 towers under construction, reported in February. According the EC Harris’ report, Qatar’s resource challenge is related to the speed of proposed development. There is plenty of capacity in local supply chains as these have already been put in place in anticipation of a fast start to programme delivery. By contrast, there are potential constraints in the availability of construction professionals and some imported materials - mainly due to transport infrastructure. Currently prices are stable, but have the potential to increase quickly if procurement is not accelerated and additional capacity built over the next two years.

The annual study, which benchmarks building costs in 47 countries, found that relative construction costs across the globe have also been affected by substantial fluctuations in currency throughout the year. However, with Gulf currencies including Qatar closely tracking the United States dollar, the impact of fluctuations related to this factor has been limited.

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