Construction Tender Prices rise 6.2% in 2017 with 7% increase predicted for 2018
- Prices hit 2008 levels, Chartered Surveyors raise concern for Capital Investment Plan
- Worry of unsustainable price increases, regional disparity and capacity in construction
Saturday February 17th 2018., New figures from the Society of Chartered Surveyors Ireland indicate that construction tender prices will rise by 7% this year, bringing prices up to 2008 levels.
According to the SCSI’s Tender Price index, which is the only independent assessment of construction tender prices in the country – prices increased by 3.5% in the second half of 2017 for non-residential construction. This means the annual rate of price inflation for 2017 was 6.2%.
The publication of the figures, which the Society has been compiling for 20 years and which have been on an upward trend since 2011, coincided with the launch of the National Planning Framework.
Aine Myler, Director General of the SCSI, described the increases as unsustainable and said they may hamper the ability of the present and future governments to deliver on the objectives outlined in the NPF.
Myler said; “These increases are being driven by a strong pipeline of work combined with an acute skills shortage, leading directly to increased costs. Development and construction companies are finding it more and more difficult to recruit skilled and unskilled labour. While specialist sub-contractor prices have been increasingly steadily for some time now, we are also seeing significant rate increases for traditional trades such as concrete installations, reinforcement and formwork. One other emerging challenge is the shortage of sites for the licensed disposal of construction waste. This is a particularly acute problem in Dublin and its immediate surroundings. This is also driving up construction costs and is unlikely to be resolved any time soon.”
“These are significant rate increases and are simply not sustainable in the medium to long term. The National Planning Framework is a welcome piece of joined up thinking that was never previously realised in the National Spatial Strategy and Government policies. The growth in employment and housing that underlines the plan means we’ve got to deal with pent-up demand in the residential sector while also addressing infrastructure and future commercial needs. These demands will stretch the viability and affordability of all projects, both private and public. The Government needs to help push the construction industry to be more efficient and look at areas where it could be adding to those costs. Success is measured in what you build, not what you spend. “
“Let’s not forget either the possible effects of Brexit. The Government needs to work with the construction industry to develop Brexit impact scenarios; we’ve seen the upside projections about increased demand for space, but restrictions on the movement of labour, currency risk and new tariffs on materials are all key issues that could quickly derail this NPF and the wider recovery” she said.
Fig. 1 Construction Tender Prices Index
While the indices represent a national average, the rate of increase is not uniform across the country. For the second half of 2017, Dublin showed the highest percentage increase at 3.9%. This was followed by Connacht / Ulster at 3.4%. It should be noted that prices here increased by only a very small percentage in the first half of the year. The increase in the Rest of Leinster and Munster was just over 3%.
The SCSI Tender Price Index will continue to monitor construction tender levels and trends and the Society will publish a further update early in the second half of this year.