A substantial increase in the cost of labour has eroded the impact of a 15 per cent year-on-year drop in prices of construction materials in November.

In its monthly report on the prices of building materials in November 2015 compared with October 2015 and November 2014 the Statistics Centre - Abu Dhabi (SCAD) reported a significant drop in the cost of construction materials in line with global trends as China India and developed countries are facing an economic slowdown.

The monthly average prices for 15 items part of the building materials index tracked by the SCAD showed declines in November 2015 compared with the same period last year.

The agency reported price reductions ranging from 1.1 per cent for diesel and four per cent for power cables. Prices for transport equipment fell 0.4 per cent while steel prices dipped 23 per cent. Increase in prices ranged from 0.7 per cent for false ceilings and 3.8 per cent for bathroom sets without accessories.

The report said the average wages of construction labourers increased by 1.6 per cent in November 2015 compared with October 2015.

The biggest plunge was reported for diesel prices that plummeted 23 per cent after the government withdrew subsidies; this was followed by steel dropping 20.4 per cent; wood and its products are down by 10 to 15 per cent. Other notable declines were in the prices of electric power cables that fell 15.9 per cent; and paints fell by 3.9 per cent. However false ceilings are dearer by 9.8 per cent; tiles and marble prices went up 9.4 per cent in November.

The average wages for construction labour increased 18.3 per cent year on year according to the SCAD.

Rizwan Sajan chairman of Danube Group which has interests in construction materials and property development said there is a shortage of skilled labour in the country as thousands of labourers had left the UAE after the 2008 financial crisis. In the absence of skilled labour from India workers are being hired from Nepal the Philippines and Indonesia to fill the gap. "The drop in the construction material prices has been neutralised by the rise in labour costs" he said.

However Syed Abrar Ali general manager of Trans Middle East a company involved in the construction of oil and gas projects in Abu Dhabi said workers' wages have risen only by four to five per cent. However another component of labour cost - accommodation and food costs - have surged by 12 per cent.

Abrar Ali said diesel cost contributes 40 per cent while labour cost constitutes 40 to 45 per cent of the total project cost.

However since the plant and machinery come from Korea and China where steel prices are heavily subsidised there would be little savings to be had from the fall in steel prices Abrar Ali said.

Abu Dhabi this year announced Dh300 billion for building and expanding its infrastructure over the next five years. Dubai is set to start construction on its Expo 2020-related infrastructure projects. These projects can leverage the decline in prices Abrar Ali added.

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