Warning over building price hikes

The prices quoted for tenders for non-housing construction projects climbed almost 4% in the first six months and will likely reach boom-time levels sometime next year, the Society of Chartered Surveyors Ireland has predicted.

The rising costs of projects starting at €500,000 in a very short period will come as unwelcome news for the Government and means it will get less for its money as it ramps up spending on capital projects in the coming years.

The society warned that the effects may be felt by contractors currently undertaking government work in schools and hospitals.

Given the continued rise in tender prices over a relatively short period of time, it will be a concern for contracting authorities receiving tender proposals for national projects that contractors may well run into financial difficulty half way through — as evidenced in recent school delivery projects, said society president Des O’Broin.

If the current trend continues prices will be back at the peak boom-time level of 2007 early next year. The current rate of increase is simply not sustainable in the long term,” he said, citing “ever-increasing workload coupled with the skills shortage being experienced by both main contractors and specialist sub-contractors, for the price hikes.

Construction tender prices rose 3.95% in the first six months this year, will rise by an annual 7.4% by the end of 2018, and reach record levels early in 2019, says the society.

The sharpest price rises of 4.2% and 5.1% at the half-year stage were posted in Dublin and the rest of Leinster, while prices rose by almost 3.4% and by over 3.1% in Munster and in Connacht-Ulster, respectively.

Labour prices are also rising on foot of the sectoral employment order while the price of steel, timber, and other materials, as well as oil, are also increasing, said Mr O’Broin.

Energy building regulations and uncertainty sparked by Brexit and fears of trade wars are also helping to push up prices, he said.

The Ulster Bank Construction Purchasing Managers’ survey, published last month, showed activity in housing and commercial was expanding strongly.