Construction

Building material cost hikes ‘to boost property prices’

Steel prices alone have jumped 25%, which is likely to boost real estate costs, says developer Danube

An increase in building materials price could push up the prices of apartments, villas and office space, if not contained in the next few months, according to Dubai-based property developer Danube.

“The escalation of certain building materials prices will push the construction cost upwards that might have a knock-on effect on the property prices going forward,” remarked Rizwan Sajan, the founder-chairman of Danube Group and Danube Properties in a press statement.

“Therefore, those property buyers contemplating investing in real estate, should not waste time. They should fast-track their buying decision, before developers and contractors start revising prices upwards to adjust to the new prices,” he stated.

Prices of steel – a major cost component in the building industry – has jumped 20% in the fourth quarter of 2016, up from the first quarter of 2016, according to market indices. Prices of plywood increased by 5% and sanitary ware increased by 10 to 15% – all of which will have a knock-on effect on the prices of property.

According to Mesteel.com, prices of reinforced steel bars jumped from $330 in January 2016 to $440 at the end of 2016 – a rise of 33.33%. Saudi Iron and Steel Company (Hadeed) has increased wire rod prices for the domestic market by $40 per tonne, now reaching to $493 per tonne.

The global building materials market totalled about $800 billion in 2015. The GCC accounts for approximately 3% of the global construction materials market today comprising stone, bricks, cement, concrete, glass, steel and aluminium.

Cement is a lead indicator of construction activity and health in the region. Cement accounts for about 15 to 20% or about $4 billion of the total value of building materials sold in the GCC today. Cement demand has grown at five to six per cent over the last five years. Saudi Arabia and the UAE account for most demand for cement in the GCC, about 84 per cent in total, the report added.

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