Details

-Al Mazaya Report: Construction material imports need more efficient regulation

-Volume of domestically manufactured & imported building material outpaces project supply

-Regulating domestic manufacturing fundamental to economic growth & recovery of construction, & realty markets

-Modern technology & massive budgets driving market growth over coming period

–Increased reliance on locally manufactured material leverages production & industrial sectors, fuels economic growth

The ongoing development and economic transformation plans across the Gulf region require a growing focus on enhancing the local manufacturing of building materials in order to scale down imports, which have proved to have a negative bearing on local production and ultimately on the stability of investment, commercial and industrial activities. While the real estate sector is currently going through an unstable stage, local production will inevitably lead to controlling imports while serving the local production sectors at the same time.

The weekly report of Al Mazaya Holding Company indicates that the markets of the Gulf Cooperation Council countries are considered among the most demanding and consuming as far as building material are concerned, due to increased construction projects whose value amounted by the end of 2019 to $140 billion.

The current stability in oil prices coupled with growing government spending, have reflected positively on the markets of locally produced and imported building materials, according to Al Mazaya report.

The report described the Emirati building and construction market as having been stable during the past few years in terms of prices and labour costs. The market is going through intensified development and modernisation processes, moving, for example, towards the use of glass facades to cut energy consumption by 70% and ensure high levels of efficiency and strength are maintained.

In the meantime, prices of building materials have been witnessing a noticeable increase in the local markets since the beginning of this year by 8% for cement, and 13% for reinforcing steel, which indicates continuing demand, reflecting positively on the building materials industry sector by driving it towards more expansion and development at the local level. Currently, the productive capacity of operating factories amounts to 25 million tonnes of cement annually, a large amount of which is consumed through construction projects under development.

The report stated that the Bahraini real estate market, like other neighbouring markets, is affected by the ups and downs in the establishment of residential, commercial and investment projects. The building materials sector recorded a decrease of 15%-20% in demand due to the dip in construction projects and the oversupply of building materials produced locally and those imported.

Al Mazaya pointed out that the intense competition between traders poses additional pressures on prices, leading real estate demand to fall by 10%, given that the imposition of infrastructure and electricity fees may also have a clear impact on the pace of construction projects.

The report added that the reported increase in spending for the current year to SAR 1.1 trillion is an important indicator showing the increase in the volume of project implementation, and the growing demand for building materials as the Kingdom of Saudi Arabia seeks to become one of the largest markets in the world in the field of construction. This growing tendency is fueled by considerable urban development plans as well as continuing growth in infrastructure projects, in addition to a greater focus on the tourism sector and entertainment industry, according to the report.

In a related context, the report stressed that the building materials market is facing fluctuations in demand and prices due to the difficulty in controlling the produced and imported quantities and the heated competition between companies operating in this field, with cement prices going up 2.6%, iron 2.5% and concrete 1.1%, during the first nine months of this year.

The report addressed the recent technological developments which significantly affect performance, quality and costs of construction and the duration of projects implementation, with industry data indicating that the application of these technologies will save 10%-20% of construction costs, and contribute to reducing time while ensuring higher quality.

Al Mazaya believes it’s incumbent on Gulf states to cope with and embrace digital transformation in the construction market and get rapidly geared for the intense competition in this field, noting that saving cost and time while introducing energy-efficient solutions are necessary tools to spur the real estate market and accelerate demand.

The report underlined the direct impact of some fundamental factors on the sector, foremost of which are energy prices and skilled labour and their scarcity in many times, along with market instability. It also highlighted the difficulty associated with tapping new markets where financial returns could be further utilised under the current unfavourable conditions. The report also highlighted the difficulty encountered in identifying import markets with low costs and high quality when the construction sector recovers, especially in light of the increased tendency toward more protective measures.

Al Mazaya expects better performance and higher demand for building materials during the coming period in the construction, industrial and real estate sectors, due to the sizable state budgets allocated and the growing government awareness of potential challenges.