Construction Cost Outlook for UAE and Saudi Arabia
According to the recent 2025 Construction Cost Benchmarking Report by Stonehaven, construction expenses in the United Arab Emirates (UAE) are projected to rise between 2.7% and 3.3%, while in Saudi Arabia, increases are anticipated to be greater, ranging from 3.4% to 7%.
Stonehaven highlighted that these estimations might be on the conservative side, as market fluctuations caused by global stock downturns and supply chain issues could elevate the costs of imported materials in the region.
Cost Forecast Overview for UAE and Saudi Arabia
The report noted that with more than $2.3 trillion in ongoing projects in both nations, the Gulf Cooperation Council (GCC) region is particularly vulnerable to shifts in international commodity prices. As essential materials such as steel, concrete, and aluminum see rising costs, construction expenditures are expected to escalate significantly over the next 18 to 24 months.
Gordon Rodger, the Managing Director at Stonehaven, described this forecast as a crucial warning for the construction sector. “We are encountering a perfect storm – labor shortages, antiquated methods, and growing external pressures like global trade tariffs. Developers must take decisive action to secure construction costs that match their feasibility studies, or they may face dire financial consequences,” he cautioned.
The report indicates that the anticipated inflation rates for construction costs in the GCC could rise beyond the initial forecasts of 2-5% for the UAE and 3.4-7% for Saudi Arabia due to ongoing global trade disruptions.
Stonehaven also pointed out that the region is confronted with significant labor challenges, as labor expenses account for up to 40% of total project costs. The organization advocates for the integration of automation and artificial intelligence to address these issues effectively.
Utilizing modular construction techniques, AI-driven planning methods, and Building Information Modeling (BIM) technologies is vital for controlling project costs and minimizing risks, according to the report.
The analysis also highlighted that Dubai is projected to expand with an additional 19,700 villas by 2025, while large-scale initiatives like NEOM and The Red Sea Project are transforming the construction landscape in Saudi Arabia.