According to EC Harris, the global consultancy, tender prices for construction work in the UAE fell by 3% during 2011 and are expected to remain at the same level this year.
Over the 12 months up to December, the price of nearly all commodities decreased, with the exception of crude oil, cement, reinforced bars and steel beams.
The quarterly EC Harris Tender Price Index, which measures changes in contractor input costs, also said rubber, tin and nickel showed the most movement during the year, decreasing in price by 32%, 26% and 25% respectively.
Mr Nick Smith head of Cost & Commercial for EC Harris in the Middle East said that "Commodity prices have shown huge volatility over the past year, reflecting an uncertain recovery in world markets. I don't think we will see an improvement this year, but tender prices should pick up over the next couple of years as a number of large projects across the Gulf region are given the go ahead and put out to tender."
EC Harris said that consumer price inflation, material prices and construction labor rates will all be flat in 2012, before an expected rise in 2013.
With new projects unlikely to be put out to tender until 2013 at the earliest, EC Harris warned contractors in the UAE that they face a tough 12 months and will have to absorb any increases in labor, plant or materials which will impact margins.
Looking to 2013, EC Harris added that it forecasts that tender prices are likely to rise by up to 4% during the year, followed by a steady growth of around 5% in 2014 and 2015 as confidence returns to the global economy and finance becomes more readily available.
