Saudi Construction Costs Increase 2.3% in July on Rising Equipment Rental Rates

Saudi Construction Costs Climb 2.3% in July on Higher Equipment Rental Charges

Saudi Arabia’s construction costs rose 2.3 percent year on year in July, with rising equipment and machinery rental charges driving the increase across both residential and non-residential projects, according to official data. The General Authority for Statistics said residential construction costs increased 2.2 percent annually, while non-residential costs rose 2.6 percent. The overall increase was slower than the 2.7 percent recorded in June but remained well above the 0.7 percent rise reported a year earlier.

The latest data comes as Saudi Arabia continues to expand housing, infrastructure and other major development projects under its Vision 2030 programme. On a monthly basis, the Construction Cost Index was unchanged in July, with costs in both residential and non-residential segments remaining broadly stable from June.

Equipment rental prices remain key driver

Equipment and machinery rental charges posted some of the largest annual increases during the month. In the residential sector, rental costs rose 4.2 percent, largely due to a 5.7 percent increase in the cost of equipment and machinery hired with operators.

Residential labour costs increased 1.4 percent, while energy prices rose 3 percent. Basic material costs climbed 1.8 percent, supported by a 3.9 percent increase in timber and joinery prices and a 2.8 percent rise in other building materials.

The increase was steeper in the non-residential sector, where equipment and machinery rental costs jumped 5.8 percent. Charges for equipment and machinery supplied with operators increased 7.3 percent. Non-residential labour costs rose 1.8 percent, while energy costs increased 3 percent. Basic material prices were up 1.8 percent, with other building materials rising 4 percent and timber and joinery costs increasing 2.5 percent.

Month on month, labour costs increased 0.1 percent in both sectors, while residential equipment and machinery rental costs also edged up 0.1 percent.

Construction inflation outpaces consumer prices

Saudi Arabia’s annual consumer inflation rate stood at 1.8 percent in July, below the 2.3 percent annual increase in construction costs. The Construction Cost Index tracks price movements for 51 construction inputs. Prices are collected monthly across 13 regions through field visits to contractors, engineering offices and construction-material sales establishments.

With 2023 as its base year, the index provides a gauge of cost pressures facing Saudi Arabia’s construction sector as the Kingdom advances its Vision 2030 infrastructure and development agenda.