The Kuwait Financial Center (Markaz) said that the increase in the cost of construction in Kuwait is due to the high prices of basic materials, logistical costs and lack of supply chains.
Markaz added, in a report entitled “Construction Cost in Kuwait and its Components”: The main factors in this change are the rise in the prices of basic materials and the rise in inflation rates worldwide, reports a local Arabic daily.
He explained that the significant increase in the prices of primary raw materials, such as structural steel supports, rebar, timber, copper tubes and cables, in addition to the shortage of labor at the level of the construction sector in the region, are the main reasons for the increase in construction costs in recent years.
To find out the effects of increasing inflation rates globally, the report delved into the study of rising prices of imported goods and their impact on development in the Gulf region, where geopolitical tensions and disruptions in global supply chains have increased the cost of construction in the GCC countries.
Forty percent of respondents to a Turner & Townsend survey focused that increases in construction costs significantly affect the delivery of completed development projects, while 60% indicated that a shortage of skilled labor directly affects the delivery of construction projects.
In light of the transformations that the world is going through, the report indicated that the construction industry in Kuwait is currently witnessing an increase in the cost of construction as a result of rising labor costs, and increasing prices of materials and transportation services.
Last February, the average cost of building one square meter of private housing was estimated at 230 dinars, compared to about 170 dinars per square meter before the start of the Corona virus pandemic, an increase of nearly 35% due to materials and labor costs.
According to these figures, the cost of building a private housing unit with an area of 1,240 square meters increased from 210,000 dinars (170 dinars per square meter) before the outbreak of the epidemic to 285 thousand dinars (230 dinars per square meter). This cost is $741 per square meter, which while high, is still lower than the cost of building villas and the high rise in Saudi Arabia and the United Arab Emirates, which have an average cost per square meter of $1,396 and $1,835 per square meter respectively.
The report attributed the relatively low construction costs in Kuwait, compared to high market conditions, to the state’s support for building materials prices, in addition to implementing price control policies and banning the import and re-export of major building materials, such as wood and iron.
The report pointed out that construction costs in Kuwait and the Gulf Cooperation Council countries are affected by changes in global supply chains, increasing material costs, and global social and economic policies.
It is estimated that commodity prices will remain above average for the next five years, and therefore metal prices are expected to remain at historically high levels. According to World Bank forecasts, prices of commodities, minerals and energy are expected to decline in 2023, but are expected to remain high.