Soaring costs and construction skills shortages threaten housing targets

Analyst says construction costs accelerating at a faster pace than the value of projects

Soaring material costs and skills shortages across the industry will make it difficult for the Government to reach its 2030 home construction and retrofitting targets, according to two-thirds of Irish construction companies in a new survey.

The Government last September set a goal under its Housing for All plan for 33,000 new homes to be built every year by the public and private sector until 2030 as the State grapples with a massive undersupply of residential properties.

Earlier this year it announced a multibillion programme to improve the energy efficiency of the State’s housing stock with 500,000 deep refits targeted over the same period.

However, a survey of 300 construction firms, carried out by Core Research on behalf US software group Autodesk’s construction services arm, found that 63 per cent of respondents were struggling to recruit skilled workers in a tight labour market. Some 85 per cent said that rising material costs and the sheer scale of construction demand in Ireland were the main challenges facing the industry.

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“Two-thirds of construction companies believe Housing for All and the national retrofit plan will be difficult to meet based on workforce challenges and increasing costs,” the report said.

The Central Bank currently forecasts Irish housing completions will total 24,500 in this year, increasing to 29,000 in 2023 and 33,000 in 2024.

Two-fifths of Irish construction companies say they are currently trying to recruit staff, mainly as a result of an increase in contracts and secured work, but also to backfill jobs as staff turnover remains an issue in the sector.

“Two in three of every construction company are finding it hard to recruit the talent they need, with 59 per cent putting recruitment challenges down to a shortage in the availability of skilled labour in general,” the authors of the research said. “It’s a situation that many professionals believe will worsen over the next decade, particularly when it comes to traditional trade skills. Nearly half of those surveyed are concerned about the rarity of trade skills like bricklaying and plastering.”

All three parts of Ireland’s construction sector – residential, commercial and civil engineering – contracted in June for the first time since the onset of the inflation crisis early last year, according to the latest reading of the BNP Paribas Real Estate purchasing managers’ index.

Around 64 per cent of respondents to that survey, published last week, signalled that their input prices had increased in June.

John McCartney, head of research at BNP Paribas Real Estate Ireland, said that “a recurring theme” is that construction costs are accelerating at a faster pace than the value of projects, “squeezing viability”.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times