Tender prices increased by 2.6% in the first half of 2017

Society of Chartered Surveyors Ireland says supply constraints blocking construction

Upward trend in tender prices set to continue with a rise of 3.6 per cent predicted for the next six months.

Upward trend in tender prices set to continue with a rise of 3.6 per cent predicted for the next six months.

 

Construction tender prices increased by 2.6 per cent in the first half of 2017, according to the latest figures published by the Society of Chartered Surveyors Ireland (SCSI).

The Tender Price Index, which is the only independent assessment of construction tender prices in Ireland, shows the upward trend which has been evident since 2011 is set to continue with a rise of 3.6 per cent predicted for the next six months.

The SCSI said the forecast will mean an annual increase of 6.2 per cent for 2017 as a whole, which is similar to the 6.3 per cent recorded for 2016. This will bring prices back to the level they were at in 2004.

Kevin James, chairman of the Quantity Surveying Professional Group of the SCSI, said wage pressures would continue to drive prices higher.

“The increased level of construction activity is leading to a shortage of resources across multiple trades for both main contractors and specialist sub-contractors,” he said.

“Exchange rate fluctuations between the euro and sterling due to Brexit have also increased the cost of some materials. Looking ahead the increasing pressure for wage increases in the industry will also drive tender prices higher.

“The price increases reflect the increasing level of construction activity we are seeing across the country, but especially in the greater Dublin area.”

In Dublin, tender prices increased by almost 3 per cent in the first six months, followed by Munster at 2.65 per cent, the rest of Leinster at 2.56 per cent and Connacht / Ulster only showing an increase of 1.5 per cent.

“For the second half of the year we are forecasting a rise, on average of 3.6 per cent with Dublin again showing higher rates,” said Mr James.

Mr James said it was “inevitable” that the rise in tender prices would have a knock on effect on house building costs.

“While this tender price index relates to non-residential construction, the findings raise questions about the capacity of the sector as a whole to cater for an increased level of house building and the cost of delivering those houses,” he said.

“Recently it was announced that 3,000 new social housing units would be built by next year, but given the supply constraints we are seeing on the ground, it’s still not clear who is going to build them.”