Saudi Arabia’s construction cost index (CCI) experienced a year-over-year increase of 1 percent in October 2025, according to a recent bulletin released by the General Authority for Statistics (GASTAT). The rise reflects growing expenses in both the residential and non-residential sectors, signaling continued activity within the Kingdom’s significant building and infrastructure programs. This data provides a key indicator for investors and stakeholders in the Saudi Arabian real estate market.
The GASTAT report, published Sunday, detailed that residential sector costs climbed by 1 percent, while non-residential construction saw a 0.9 percent increase compared to October 2024. These figures are based on price movements of 51 commodity and service items tracked monthly across the Kingdom, using 2023 as the base year.
Understanding the Rise in Construction Costs
Several factors contributed to the overall increase in the construction cost index. A significant driver was the escalating cost of labor, which rose by 1.5 percent in the residential sector and 1 percent across the board. This increase likely reflects both domestic wage pressures and the cost of employing skilled foreign workers, a crucial component of the Saudi construction workforce.
Labor and Equipment Costs
Equipment and machinery rental prices also played a substantial role, increasing by 1.2 percent in the residential sector and 1.3 percent in the non-residential sector. Specifically, rental costs for equipment operated with a dedicated operator saw increases of 1.4 percent and 1.6 percent respectively. This suggests heightened demand for construction machinery and potentially limited availability.
Additionally, energy prices experienced a notable surge, climbing 9.9 percent year-over-year. This increase impacts transportation costs for materials and the operational expenses of construction sites. The report indicates that basic material costs also saw a modest rise, with cement and concrete prices increasing by 1.3 percent.
Material Price Fluctuations
While overall basic material costs increased slightly, there were variations within the category. Raw material prices rose by 1.7 percent in the residential sector and 1.5 percent in the non-residential sector. However, timber and carpentry costs saw a more pronounced increase of 2 percent in the non-residential sector, potentially reflecting global supply chain dynamics or increased demand for wood products.
Interestingly, on a monthly basis, construction costs in the residential sector remained stable in October 2025 compared to September 2025. This stability suggests a temporary pause in price increases, potentially due to seasonal factors or a stabilization of certain material costs. The non-residential sector also experienced price stability month-over-month.
Implications for Saudi Arabia’s Building Sector
The sustained increase in the construction cost index has implications for ongoing and planned projects within Saudi Arabia’s ambitious Vision 2030 program. The Kingdom is undertaking massive infrastructure developments, including the NEOM project and various housing initiatives, all of which are sensitive to fluctuations in building material and labor expenses. Rising costs could potentially lead to project delays or budget revisions.
However, the Saudi government has demonstrated a commitment to mitigating these risks through strategic investments in local manufacturing capabilities and workforce development programs. These initiatives aim to reduce reliance on imports and enhance the availability of skilled labor, ultimately contributing to greater cost control within the construction industry. The Kingdom is also actively seeking foreign investment to support its building programs.
The relatively modest monthly stability in October offers a brief respite, but the underlying trend of increasing costs remains a concern. The broader economic climate, including global commodity prices and geopolitical factors, will continue to influence the Saudi Arabian building sector. Furthermore, the availability of credit and financing options for construction projects will play a crucial role in sustaining growth.
Looking ahead, GASTAT is expected to release the November 2025 CCI bulletin in December. Analysts will be closely monitoring these figures to assess whether the upward trend in construction costs continues or if the market experiences a period of stabilization. The impact of potential changes in government policies related to labor and materials will also be a key factor to watch, as will the overall performance of the Saudi Arabian economy and its impact on demand for new construction projects.
