Saudi Arabia registered a 2.2 percent year-on-year increase in construction costs in September, according to data from the General Authority for Statistics. The agency reported that rising expenses across labor, energy, materials, and equipment rentals propelled the annual rise.
Residential sector construction costs grew 2.1 percent compared to the previous year. This increase stemmed from a 1.7 percent jump in basic materials costs, a 3.5 percent rise in timber and joinery prices, and a 4.1 percent increase in equipment and machinery rental expenses.
Labor costs in the residential sector moved up 1.5 percent. Energy costs climbed 3 percent. Meanwhile, non-residential construction costs advanced 2.6 percent over the same annual period.
The non-residential increase was driven by a 5.8 percent surge in equipment and machinery rental expenses. This category included a 7.2 percent jump for machinery rented alongside an operator.
Non-residential labor costs increased 2 percent, and energy expenses rose 3 percent. Basic materials for non-residential projects grew 1.8 percent, with timber and joinery rising 2.1 percent and other building materials jumping 4.3 percent.
The overall construction cost index remained unchanged in September compared to August. Costs stayed stable across both residential and non-residential sectors month on month.
Rajesh Duneja, a partner at Arthur D. Little Middle East, said contractors and suppliers absorbed much of the extra freight and input costs rather than passing them to clients. Cargo had been rerouted through Red Sea ports and materials normally arriving by sea were being trucked in due to regional conflict threatening supply chains.
He warned that this would not be permanent. If disruptions at Gulf chokepoints continue, those costs will eventually reach project budgets.
Munir Al-Daraawi, founder and CEO of Orla Properties, described the annual increase as indicative of moderate cost pressures. He said the numbers are encouraging against the scale of Saudi development ambitions, as developers need predictable costs for materials, labor, and specialist services.
Al-Daraawi said costs alone do not show market health, emphasizing that projects must move forward within realistic budgets to meet buyer demand. He called September stability a positive short-term signal and advised developers to strengthen procurement plans.
In its October report, Knight Frank valued the Saudi project pipeline at $2.07 trillion for the first half of 2026. The consultancy forecast construction output to reach $190.4 billion this year, up from $179.4 billion in 2025, and projected output to hit $250.2 billion by 2030, while warning that rising expenses could prompt developers to rephase projects.
Separate figures from the Al Rajhi Capital Saudi Construction Index, compiled by S&P Global, showed construction activity expanding for a fifth consecutive month in September. The seasonally adjusted index eased to 54.4 from 55.4 in August, staying above the 50-point threshold that separates expansion from contraction.
