The Construction Industry in the Republic of Ireland grew steadily in parallel with the economy from the early 90’s reaching a peak construction output of c. €38bn in 2007 (24% of GDP). Thereafter demand collapsed and the output of the Irish Construction Industry contracted substantially, falling to circa €8bn in 2012. This reduction in output resulted in 5 of the 2007 top 10 contractors going out of business and caused financial strain throughout the supply chain. The remaining large contractors saw their annual output drop by 40 to 70%. House completions which peaked at 93,419 in 2006 fell to 8,301 in 2013. Construction Industry employment dropped from circa 270,000 to circa 150,000.

The prospects for the Irish Construction Industry first began to improve in H2 2013. In 2019, the Irish Construction Industry saw the seventh successive year of growth. The strong performance in 2019 was driven by a combination of continued investment in the commercial sector, gradual recovery in the residential sector and an increase in public sector spend. This growth is due to a number of demand factors including:

• Economic Growth
• Continued Foreign Direct Investment
• Lack of available accommodation resulting from the 2008-2013 collapse in construction.
• Large Public Capital Programme Projects
• Pent up Demographic Demand
• Rising Employment

Scollard Doyle recorded 5 cranes in Dublin City Centre in Q1 2015 rising to 123 in Q2 2019.

Construction output is estimated at €23bn in 2019, an increase of circa 12% on 2018. We anticipate the value of construction output to grow to €26bn in 2020.

There was 21,241 homes completed in 2019, an increase of circa 3,000 units on the 2018 total. The breakdown of the 2019 completions is as follows:

• 5,068 : One-off houses (24%)
• 12,529 : New housing estates (59%)
• 3,644 : Apartments (17%)

Of the above numbers the State acquired 4,392 units (21%) (Part V : 2,229 / Purchase : 2,163).

Investment funds purchased 95% of the apartments constructed (circa 3,460). Taking these in the consideration and the one off homes, it leaves 8,321 homes for private sale.

Tender Price Inflation

The Society of Chartered Surveyors Ireland (SCSI) Tender Price Index has revealed that national construction tender prices during the period were as follows :

• 2013 : 3.10%
• 2014 : 5.01%
• 2015 : 5.47%
• 2016 : 6.34%
• 2017 : 6.35%
• 2018 : 7.50%
• 2019 : 6.57%

The results indicate a continued slowing of Tender price growth in the construction sector. Based on the projections, projected that H2 in 2019 will slow to a rate of 3.1%, bring the total for 2019 to 6.57%.

Based on current trends, there may be a leveling off of tender price inflation in 2020. We project that inflation will be in the order of 5% in 2020.

The above percentage increases reflect a national average. Construction prices in the Greater Dublin Area and other major urban centres will increase at a faster rate, particularly for complex inner city projects, while increases in provincial locations will be more modest.

There is uncertainty for investors in 2020 with the current Political situation, suggested rent freezes, changes to stamp duty and other government changes dependant on the party leading the next government.

Construction prices in 2020 are likely to continue to rise due to :

• Sectoral employment orders,
• Increasing building standards, including the nZEB and fire regulations,
• Shortage of waste disposal sites,
• Labour bottleneck in trades
• Demand for traditional trades of concrete, reinforcement and formwork
• Demand for specialist subcontractor works for mechanical, electrical and glazing
• Continued strong demand

Global trade risks and local political developments may impact on industry demand.

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Michael Scollard – Managing Director Scollard Doyle, Construction Consultants