The index was 2.65 higher than a year earlier, driven by increased equipment rental, labour, and energy costs in both the residential and non-residential sectors. Residential construction costs climbed 2.5% annually, while the non-residential sector recorded a stronger 3% increase.

The increase also coincides with Saudi Arabia’s ongoing push for major infrastructure and tourism projects under its “Vision 2030” socio-economic diversification plan. As per the GASTAT, flagship developments such as Neom, Qiddiya, and the Red Sea Project have continued to generate strong demand for contractors, machinery, and building materials.

“CCI for the residential sector recorded an annual increase of 2.5% as a result of a 4.7% rise in the cost of renting equipment and machinery, driven by a 6.3% increase in the rental of equipment and machinery with operators,” said GASTAT.

“In the residential sector, labor costs rose 2.5%, while energy prices increased by 3%. Basic materials costs went up 1.6% year on year, with timber and joinery prices rising 3.6% and other building materials increasing 2.6%. The non-residential sector’s 3% annual increase was driven by a 6.7% rise in equipment and machinery rental costs, propelled by an 8.5% increase in rentals with operators,” the government agency added further.

“Both labor costs and energy prices increased by 3% year on year across the sector in May. Basic materials costs also rose 1.6%, with other building materials increasing 3.7% and timber and joinery products rising 2.3%. This (monthly increase) is mainly attributed to a 0.2% rise in costs for the residential sector and a 0.3% increase in costs for the non-residential sector,” GASTAT noted.

This increase in construction costs comes amid signs of moderation in Saudi Arabia’s real estate market, particularly in the residential sector. The Kingdom’s real estate price index declined 1.6% in Q1 2026, largely due to a 3.6% drop in residential property prices.

The sustained momentum in Saudi Arabia’s construction sector mirrors broader trends across the Gulf Cooperation Council (GCC), where nations are intensifying efforts to diversify their economies away from oil dependence.

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