The UAE’s construction industry is forecast to grow over the next year despite mounting concerns around the cost of materials, according to new research.
The UK-based Royal Institution of Chartered Surveyors (RICS) said in its latest UAE construction monitor for the fourth quarter of 2021 that it expected to see “strong levels of activity” in 2022.
The positive forecast comes despite concerns around the cost of materials needed to deliver schemes and the financial options available to developers.
In terms of workloads for Q4 2021, an increase of nearly 20 percent of respondents said they continued to see rises in demand for construction work in the UAE.
Infrastructure works are seen to be the main reason for the increase in workloads, with a net balance of nine percent more respondents citing a rise.
Elsewhere, residential housing developments continued to show growing momentum with a net balance of +8 percent of respondents reporting growth in this area, according to the report.
Looking to the year ahead, new infrastructure works are viewed as likely to lead the sector (by a net balance of +56 percent), with private housing and non-residential works closely following with both anticipated as also deliver strong growth in output (+45 percent and +32 percent respectively), RICS added.
Despite this positive outlook, more respondents reported a fall in both new business enquiries, down by a net balance of -3 percent) and profit margins (-29 percent), suggesting profits and enquiries are not expected to match the increased workloads.
Concerns reported by respondents focused on the lack of financing available to make schemes viable (82 percent) and cost of materials (65 percent) as the biggest factors that are now holding back the construction sector in the UAE.
Looking ahead, material costs are expected to grow by 6.19 percent over the next year – the largest increase faced by developers when compared with other costs such as other construction costs (5.32 percent) or paying for skilled labour (2.98 percent).
Tarrant Parsons, RICS economist, said: “Sentiment continues to improve across the Middle Eastern construction industry in aggregate, evidenced by the headline Construction Activity Index rising for a fifth successive quarter.
“The UAE is another market across the region that has made positive progress during Q4, marking a notable turnaround compared to the more downbeat feedback seen earlier in the year.”
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