Construction costs have dropped to 2003 levels

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Should property prices be decreased in line with the reducing costs of building materials?

A softening in prices of building materials is expected to kick the construction industry back into action this year, after a first quarter marked by project delays, industry experts say.

Cement companies in the UAE have been asked to reduce the price of cement by 22 per cent with effect from April 1. The new price has been fixed at Dh280 for a tonne of bulk cement and Dh14 for a bag. Most factories have been selling bulk cement at about Dh330 to Dh360 per tonne, while bags are priced at Dh16 to Dh18 and an additional dirham is levied as transport charges.

The Ministry of Economy, in co-ordination with the Cement Producers Group, has decided to revise the cap on prices, in keeping with the prevailing conditions.

Contractors currently pay Dh1,850 per tonne of unquoted steel rebar. Data shows that steel rebar was priced at Dh6,500 per tonne in July 2008 before falling to Dh3,000 per tonne by the end of the year. Now that steel rebar is around Dh1,850 per tonne, it is back to 2003 levels.

Construction costs have dropped and will now start stabilising because of the inventory in the system.

Many contractors have projects that have been delayed and so they will become more cut-throat to get work, even if it means cutting costs.

The government recently re-instated the five per cent customs duty on cement and steel after removing it last March in an effort to support the massive boom in construction, facilitate supply and keep prices low.
Dubai Customs said the decision to reintroduce customs duty on the import of cement and steel has been made effective from February 15.

Have you noticed a decrease in real estate prices?

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