Building inflation era 'over'

The era of high inflation in the building sector is over for the present with tender levels set to fall by around 2 per cent this year, in the wake of a 3 per cent slip in 2003, according to the Davis Langdon PKS annual review of the construction industry.

Falling volumes of new projects, other than housing, and growing competition has seen prices decline, said Mr Michael Webb, DLPKS managing partner.

He said: "Up until recently too much work was being released onto an already overheated construction market. This problem has gone away and tender levels have shown real reductions in the past two years, because of a slowdown in the rate of growth in the industry and an increase in capacity," he said.

With prices falling to more reasonable levels, the Government should urgently boost spending on infrastructure projects, said Mr Webb.

Overall, the construction sector grew 0.7 per cent in 2003 with total output of €22 billion. General construction was down 11 per cent in volume and is predicted to decrease by another 3 per cent in 2003.

However, the housing boom will continue in 2004, said DLPKS. New completions will top 67,000 for the year - more than three times the 1992 level, it said. This translates into 15 houses per 1,000 population, against two per 1,000 in UK and Sweden.

"The strength of the housing market has again continued to surprise us all. Housing was the star performer again in 2003, continuing to be the dominant force and accounting for 57 per cent of construction in Ireland," said Mr Webb.

Civil engineering is also performing buoyantly, with 3.5 per cent growth in 2003.

This is expected to increase to 6 per cent over the next 12 months.