{"id":102492,"date":"2026-03-24T11:08:49","date_gmt":"2026-03-24T08:08:49","guid":{"rendered":"https:\/\/amlak.net.sa\/?p=102492"},"modified":"2026-03-24T11:08:50","modified_gmt":"2026-03-24T08:08:50","slug":"%d8%aa%d9%83%d8%a7%d9%84%d9%8a%d9%81-%d8%a7%d9%84%d8%a8%d9%86%d8%a7%d8%a1-%d9%81%d9%8a-%d8%a7%d9%84%d9%85%d9%85%d9%84%d9%83%d8%a9-%d8%a7%d9%84%d8%b9%d9%85%d8%a7%d9%84%d8%a9-%d9%88%d8%a7%d9%84%d8%b7","status":"publish","type":"post","link":"https:\/\/amlak.net.sa\/en\/102492\/","title":{"rendered":"Construction costs in Saudi Arabia. Labor and energy led the rise last month"},"content":{"rendered":"

While Construction Sector<\/a><\/strong> The Kingdom is experiencing rapid growth driven by major infrastructure projects and urban expansion. The latest data reveals continued pressure on construction costs, as the prices of building materials alone are no longer the decisive factor in project costs; rather, other factors \u2014 primarily labor and energy \u2014 have become the most influential factors in the cost equation, reflecting a clear shift in the spending structure within the construction sector.<\/p>\n\n\n\n

Significant Year-Over-Year Increase in the Construction Cost Index<\/strong>
According to data General Authority for Statistics<\/a><\/strong>The construction cost index in Saudi Arabia rose by 1.4% in February 2026 compared to the same period in 2025, The index rose to 102.5 points based on the 2023 base year, compared to 101.1 points in February of last year, continuing the upward trend that began gradually in 2025 and continued into the start of this year.<\/p>\n\n\n\n

The index is considered Construction costs<\/a><\/strong> A statistical tool that measures changes in the prices of a comprehensive set of construction components, including materials, services, labor, equipment, and energy, and is widely used by economic planners and researchers to assess trends in the construction sector and its impact on economic development.<\/p>\n\n\n\n

An upward trend since early 2025<\/strong>
An analysis of the index\u2019s performance over the past few months indicates a relatively stable growth trajectory, as it began 2025 at approximately 101 points before gradually rising throughout the year with a series of slight increases. The index continued to rise at a modest but steady pace until the end of the year, reaching 101.9 points in December 2025, then recorded a relatively larger jump in January 2026 to 102.4 points, before continuing to rise to 102.5 points in February.
This trend reflects a state of relative stability in the market, as the increases have been gradual rather than sharp, suggesting accumulated cost pressures rather than sudden price shocks.<\/p>\n\n\n\n

Labor Costs Are the Main Driver of Rising Costs<\/strong>
The year-over-year increase in construction costs was driven primarily by rising labor costs, which grew by 2.8% compared to February 2025, making them the most significant factor in the rise of the overall index.
Equipment and machinery rental costs also rose by 1.9%, while energy costs recorded the highest growth rate among the various components at 3.0%, reflecting an increase in operating expenses associated with project implementation.<\/p>\n\n\n\n

In contrast, prices for basic materials\u2014which account for about half of the index\u2019s weight, totaling 48.5% \u2014 remained relatively stable, recording a slight increase of no more than 0.2%, which helped limit the acceleration of the overall rise in construction costs.
In other words, raw materials are no longer the main driver of price increases, as they were in previous years; instead, the pressure has shifted toward operational and implementation costs.<\/p>\n\n\n\n

An Analysis of the Index Components<\/strong>
An analysis of the index\u2019s components reveals that, although basic materials account for the largest share of the index, they showed only a very limited change, indicating relative stability in the prices of key construction inputs.
In contrast, labor accounted for nearly one-third of the index\u2019s weighting, and as its cost rose at a faster pace than that of the other components, this had a direct impact on the overall index. The increase in equipment and energy costs\u2014despite their smaller weights\u2014also contributed to the index\u2019s upward trend, particularly as modern projects rely more heavily on specialized equipment and energy-intensive operations.<\/p>\n\n\n\n

The residential sector is driving the rise<\/strong>
The data showed that the residential sector, which accounts for the largest share of construction activity at 77.5%, recorded a year-over-year increase in costs of 1.4%. This growth resulted from a 2.7% increase in labor costs, along with higher equipment and energy costs, while prices for basic materials remained nearly stable, with a slight increase of 0.3%.
This reflects the continued strong demand for residential projects, particularly in light of housing programs and urban expansion, which is driving up demand for labor and construction-related services.<\/p>\n\n\n\n

Faster growth in the nonresidential sector<\/strong>
As for the nonresidential sector, it recorded a relatively larger increase of 1.5% year-over-year, driven by a higher rise in labor costs\u2014which reached 3.0%\u2014as well as higher equipment and energy costs.
Although this sector accounts for a smaller share of the overall index compared to the residential sector, the higher growth rate indicates increased activity in commercial, service, and infrastructure projects, which typically require specialized equipment and higher labor intensity.<\/p>\n\n\n\n

Stable material prices are limiting the acceleration of construction inflation<\/strong>
One of the most notable features of the February 2026 data is the relative stability of material prices in both the residential and nonresidential sectors. This stability played a pivotal role in curbing the rise in overall costs; had material prices risen significantly in tandem with increases in labor and energy costs, the index would have seen a much larger jump.
This suggests that the current pressures on the construction sector are linked more to operational factors than to supply chains or raw material prices.
These data reveal a gradual shift in the structure of construction costs within the Kingdom, as construction and operating costs\u2014rather than materials alone\u2014have become the most influential factor in project pricing. This may prompt developers and contractors to reassess their pricing models and the management of human and technical resources to contain future costs.
The moderate increase in the index also indicates that the sector continues to grow at a balanced pace, with no signs of sharp spikes that could negatively affect the sustainability of projects, which reinforces expectations that construction activity will remain on a stable trajectory in the coming period.<\/p>","protected":false},"excerpt":{"rendered":"

Reading time: <\/span> 3<\/span> Minutes<\/span><\/span>While the Kingdom's construction sector is witnessing accelerated activity driven by major urban projects and urbanization, the latest data reveals continued pressure on construction costs, as construction material prices are no longer the only decisive factor in the cost of projects, but other elements - mainly labor and energy - have become the most influential player in the cost equation, reflecting ... 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