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 continued demand for skilled workers supporting large-scale projects.
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 *with* operators saw larger increases, at 1.4 percent and 1.6 percent respectively. This suggests a potential shortage or increased demand for qualified equipment operators.
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 remained stable in October 2025 compared to September 2025. This suggests that the year-over-year increases are not necessarily indicative of accelerating monthly inflation, but rather a sustained upward trend in costs. This stability in monthly figures could be attributed to seasonal factors or a temporary pause in price increases.
Implications for the Saudi Arabian Construction Sector
The increase in the construction cost index has several implications for ongoing and future projects in Saudi Arabia. Developers and contractors may need to reassess project budgets and timelines to account for higher input costs. This could potentially lead to adjustments in pricing for new construction projects and a greater emphasis on cost-effective building techniques.
The Kingdom’s ambitious Vision 2030 plan includes numerous large-scale construction projects, including NEOM, the Red Sea Project, and various infrastructure developments. Continued monitoring of the CCI will be crucial for assessing the financial viability of these projects and ensuring their successful completion. The real estate market, a key component of Vision 2030, will be closely watching these trends.
However, the Saudi government has demonstrated a commitment to supporting the construction sector through various initiatives and investments. These efforts aim to mitigate the impact of rising costs and maintain momentum in the Kingdom’s development plans. The government’s focus on diversifying the economy and attracting foreign investment is also expected to contribute to the long-term sustainability of the construction industry.
The broader economic context, including global commodity prices and international trade conditions, will also influence construction costs in Saudi Arabia. Fluctuations in oil prices, for example, can impact the cost of energy and transportation, while changes in global supply chains can affect the availability and price of building materials. Monitoring these external factors is essential for understanding the dynamics of the Saudi Arabian construction market.
Looking ahead, GASTAT is expected to release the November 2025 CCI bulletin in December. Stakeholders will be watching for any further increases in costs, particularly in the labor and materials categories. The report will also provide insights into the impact of seasonal factors and any potential changes in government policies. Continued analysis of the CCI will be vital for informed decision-making in the Saudi Arabian construction sector, and for assessing the overall health of the Kingdom’s economy.
