Construction costs have continued to rise for the fifth consecutive month, driven by significant increases in labor wages, raw material prices, and supply chain disruptions. Globally, the construction sector is experiencing persistent inflationary pressures, with notable impacts observed in major markets including the Middle East, India, and North America.
Global Construction Cost Trends
Recent data indicates a consistent upward trend in construction costs in 2025. Key materials like concrete and copper have registered price increases of 7% and 5% respectively over the past year, while structural steel prices have begun to rise after a period of decline. Labor wages, a major component of construction expenses, have increased on average by 4%, outpacing material cost growth which stands around 3%. This wage inflation is particularly acute in regions like India, where labor costs have surged by 25% within a single year and 150% since 2019.
Additional factors such as logistics, compliance, and increased approval charges are compounding cost pressures globally. Overall material cost inflation persists despite some fluctuations in specific commodities like reinforcement bars which have shown marginal price declines recently.
Middle East and GCC Market Dynamics
In the Gulf Cooperation Council (GCC) region, cost escalation is pronounced but somewhat moderate. Reports show construction costs in the UAE are expected to rise between 2% and 5%, whereas Saudi Arabia faces slightly higher increases ranging from 5% to 7% in 2025. These hikes are linked to growing demand driven by expansive government-led infrastructure and transformative projects under strategic visions such as Saudi Arabia’s Vision 2030. However, supply chain uncertainties and shortages of skilled labor continue to constrain the industry.
The average construction cost per square meter in Riyadh, for example, remains competitive globally at approximately USD 3,112 compared to London’s USD 5,385, but the upward trend is clear. This persistent rise is also influenced by the boom in sectors such as digital infrastructure and renewable energy that demand specialized construction inputs.
Regional Variations and Influencing Factors
While labor costs are a primary driver of the cost increases worldwide, regional variations exist in the scale and reasons behind rising expenses. India’s housing construction costs have soared by 39% over four years, with materials like copper and aluminum showing significant price increases within the last year.
Despite modest rises in some construction materials, labor’s rising share, over one-fourth of the total construction cost, has elevated overall budgets notably. Similarly, the US construction market reports a more moderate inflation with increases forecast around 4.69% year-over-year, but potential tariffs on imported materials pose risks to further cost hikes.
The outlook for construction costs in 2025 remains upward but with signs of moderation compared to previous years. Industry forecasts suggest a global construction cost inflation averaging around 7%. Key challenges expected to keep upward pressure on budgets include geopolitical tensions, tariff impositions, labor shortages, and energy price volatility.
However, potential easing of interest rates and increased construction activity in private residential and nonresidential sectors could partially offset cost inflation effects. The construction industry is also influenced by climate-related disruptions in certain regions, delaying projects and adding to costs.
