Saudi Arabia’s Construction Cost Index (CCI) registered in July 2025 an overall increase of 0.7 percent compared to July 2024, reflecting a gradual rise in costs for both the residential and non-residential construction sectors. This increase marks a continuation of inflationary pressures in construction inputs, primarily driven by rising labor costs, energy prices, and equipment rental fees, despite a slight decline in basic material prices, according to a new report from the General Authority for Statistics (GASTAT).
Residential sector
The residential construction sector, which accounts for the largest share of the total construction market at 77.5 percent, experienced a year-on-year cost increase of 0.7 percent. This rise can be attributed to several key factors. Firstly, there was a noticeable 1.8 percent increase in rental prices for equipment and machinery, particularly within the category of renting equipment and machinery without operators, which saw an increase of 2.5 percent. This factor significantly impacted overall inflation in the residential construction sector due to its substantial weight. Additionally, energy prices surged by 9.9 percent, largely driven by a sharp 27.3 percent increase in diesel fuel prices, which directly affected operational expenses on construction sites. Furthermore, labor costs in the sector climbed by 1.5 percent, reflecting wage inflation within the construction workforce.
The prices for basic materials experienced a slight decline of 0.7 percent, mainly attributed to falling costs of wood and carpentry (down 2.1 percent) and metal products (down 1.9 percent). This slight moderation in material prices somewhat offset the overall cost increases from labor and energy, the report highlighted.
Non-residential sector
The non-residential sector, which makes up 22.5 percent of the construction market, experienced a 0.6 percent increase in construction costs compared to July 2024. This upward pressure was influenced by several factors. There was a 1.9 percent rise in the costs of renting equipment and machinery, bolstered by a 2.3 percent increase specifically in rentals without operators. Additionally, labor costs rose by 1.2 percent, which, while slightly lower than the increases seen in the residential sector, still contributed significantly to overall expense growth. Furthermore, energy costs increased by 9.9 percent, reflecting trends similar to those in the residential sector and driven by spikes in diesel fuel prices.
Similar to the residential sector, basic material costs fell by 0.7 percent, highlighting a consistent trend in decreased raw material prices within construction, GASTAT noted.
Monthly changes
When comparing to June 2025, construction costs exhibited modest increases. In the residential sector, costs rose by 0.4 percent, primarily driven by a 1.1 percent increase in labor costs. Meanwhile, the non-residential sector saw a 0.5 percent rise in costs, influenced by a 1.3 percent increase in labor costs and a 0.8 percent increase in equipment and machinery rental fees.
These monthly changes indicate continued upward pressure on labor and equipment costs, which are crucial components of construction expenditure.
Key drivers and weightings
The Construction Cost Index tracks the price movements of 60 construction input items, which include materials, labor, energy, and equipment. Data is collected monthly from thirteen regions across Saudi Arabia through field surveys conducted in contractors’ offices, engineering firms, and sales establishments. In the breakdown of input items, basic materials have exhibited a downward trend, alleviating inflationary pressures. Labor and rental costs for equipment and machinery have consistently contributed to rising construction expenses. Additionally, energy costs, significantly affected by volatile diesel fuel prices, have shown substantial increases in mid-2025.
