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In the UAE, construction was again the biggest pie for new project incentives, accounting for 59.7% of total projects in Q3 2022
Workers share a good time at a construction site in Dubai. The UAE construction market is expected to be worth $133.53 billion by 2027. file photo
The UAE project market surpassed Saudi Arabia for the first time since the eighth quarter with contracts awarded at US$3.7 billion in the third quarter, against the backdrop of a decline in the GCC project market due to heightened global economic challenges.
Regional challenges facing the project market include high inflation and ongoing supply chain issues, mainly due to intermittent Covid-19 restrictions in China and US-EU sanctions on Russia. In addition, according to Kamco Invest’s GCC Project Market Update, the increase in benchmark interest rates by global and regional central banks to combat runaway inflation has also affected project funding.
In the UAE, construction was again the biggest pie for new project incentives, accounting for 59.7% of total projects in Q3 2022. However, despite topping the regional project grant market, the total value of projects awarded in the UAE during the period fell by 5.9% year-on-year and 11.9% month-on-month, according to the market update.
According to Mordor Intelligence, the UAE construction market is expected to be worth $133.53 billion by 2027, growing at a CAGR of 4.69% during the forecast period (2022-27). A series of reforms and liberal economic and industrial policies in the country are attracting foreign investors and boosting the construction market, which is expected to grow rapidly in the coming years.
The UAE construction project market rebounded in 2021 and is expected to continue its upward trend in 2022, according to a report by real estate investment and consultancy firm JLL. Prominent property developers are announcing a slew of high-end mixed-use projects, backed by the UAE government’s new visa legislation allowing real estate investors to obtain golden visas when they buy properties worth AED2 million.
During the third quarter, the UAE accounted for 33.5% of the total contracts awarded by GCC, while Saudi Arabia accounted for 31.8%. New projects awarded in the quarter fell 36.7% year over year to $2.2 billion, down from $3.5 billion in the same quarter of 2021. Incentives in the power, water and transportation sectors increased year-over-year during the quarter.
Despite the contraction in the third quarter, the project market pipeline in the GCC region continues to be strong, with data from Meed Projects showing that the GCC has planned or ongoing projects worth approximately $2.5 trillion as of mid-October 2022, And $2.61 trillion in late June 2022.
According to a Kamco report, the total value of pipeline projects in the GCC (pre-execution stage) as of October 12, 2022 is $858 billion. In terms of countries, Saudi Arabia accounted for 44.8% ($384.5 billion) of GCC pipeline projects, followed by the UAE with 17.2% ($147.8 billion) and Kuwait with 14.7% ($125.8 billion).
The GCC construction sector accounted for 28.4% or $243.9 billion worth of pre-execution-stage projects in the region, followed by the transport and power sectors with project values of $145.6 billion and $122 billion, respectively.
The total value of GCC contracts awarded by the GCC fell by 40.8% year-on-year to US$11.1 billion in Q3 2022, compared to US$18.8 billion awarded in Q3 2021.
According to the latest news, all GCC countries, with the exception of Qatar, which saw a smaller decline, saw double-digit declines in the total value of projects awarded.
Saudi Arabia, the UAE and Qatar together accounted for 96% of the total value of contracts awarded by the GCC during the quarter.
— issacjohn@khaleejtimes.com
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