Construction sector warns rising costs will hit housing supply next year

Rising costs will hit housing supply next year, according to a new report from lobby group the Construction Industry Federation (CIF).

It comes as 96 per cent of construction companies report a rise in the cost of building materials over the summer, with 85 per cent expecting further cost increases this year.

The rising cost of building materials was cited as the top concern for companies over the next three to six months, according to CIF’s economic outlook, published in advance of the lobby group’s annual conference in Dublin on Thursday.

Access to skilled labour and labour costs rank second among industry worries — cited by 72 per cent of firms surveyed — followed closely by the ability make a “healthy profit margin” from building projects and the cost of fuel.

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Just over one in 10 companies say that cost-of-living measures introduced by Government over the first five months of the year have been effective.

About “88 per cent [of construction firms] hold the view that the increased cost of building new homes will have a negative impact on housing supply in 2023”, the industry group said.

As much as 96 per cent of construction companies have reported a rise in the cost of building materials between June and August, with 85 per cent expecting cost rises to continue to year end, CIF said. This comes as the Government plans to impose a levy on concrete products as part of the mica redress programme.

“Cost increases are having a significant impact on the construction industry, with rises in the cost of materials, labour and energy,” CIF director general Tom Parlon said. “The Government’s budget announcement of a 10 per cent levy on concrete products is out of step with the needs of public consumers and construction companies” given the surge in inflation and its impact on costs already.

“We are concerned that this measure will result in additional costs for first-time buyers, people trying to extend their homes, affordable and social houses and public infrastructure projects, as it will drive costs up along the supply chain,” Mr Parlon said.

However, despite the concerns expressed by member firms, the report says that the industry remains “resilient”, with a significant number of companies expecting to increase their turnover and staff.

“Current indicators from our research are that the outlook is stable for construction companies this year, which have weathered the impact of Brexit, Covid shutdowns and supply chain disruption. But there are challenges ahead, particularly for housing targets, which now include the impact of the new levy.”

Meanwhile, the Government is still working on getting European Commission approval for its €1.25 billion plan to help businesses with energy costs this winter, but a senior commissioner gave a “fair hearing” on the proposal, Tánaiste Leo Varadkar has said.

Commission vice-president Margrethe Vestager also “didn’t balk” at an aspect of the proposal that seeks to stretch what is allowed under European Union state aid rules, the Minister for Enterprise added.

The Temporary Business Energy Support Scheme (TBESS), which was announced in the Budget, is subject to approval under the European Union’s state aid rules.