Construction costs are continuing to rise, but the rate of increase eased significantly in the second half of last year, the latest Tender Price Index from the Society of Chartered Surveyors of Ireland shows.
The report shows that the rate of commercial construction inflation increased nationally at a rate of 1.5% in the final six months of last year.
It was down from a rate of 2.4% in the opening half of the year.
The report shows that the annual median national rate of inflation throughout the 2023 calendar year was 3.9%, down from the 11.5% recorded for 2022.
The highest six-month inflation rate was recorded in the first half of 2022 when it hit 7.5%, according to the SCSI measure.
The figures point to the inflation rate being on a downwards trajectory for the last 18 months.
“The softening of the rate of increase is due in the main to the stabilisation of the price of building materials, reductions in energy and fuel costs along with greater competitiveness within the market. Reduced demand in some commercial sectors will help increase capacity within the industry for new projects,” Kevin Brady, a member of the SCSI’s Quantity Surveying Professional Group, explained.
He said the market had experienced ‘continual challenges’ in the latter half of the year with frequent increases in financing costs, shortages of skilled labour and rising labour costs, all of which remain key issues.
He added that the increase in labour costs was the main challenge facing the industry, which is being driven by a shortage of skilled tradespeople and pressure from the cost-of-living crisis which is leading to increasing wage demands.
“Given that the Housing for All targets should undergo significant upward revision in the near future, it’s also likely that the number of construction workers required to deliver the higher targets will also have to be revised upwards,” Enda McGuane, President of the SCSI said.
“We will clearly need more surveyors, electricians, engineers, plumbers, architects, and carpenters to name but a few. We need to attract more people into these roles and to develop alternative pathways to them,” he added.
The report also highlighted the potential for geo-political issues, particularly war in the Middle East, to spread more widely and impact key supply routes, leading to additional transport costs.