The key findings:
Commercial construction tender prices increased by 4% in the second half of 2022, down from 7.5% in the first half
Chartered Surveyors say national annual rate of construction price inflation is now running at 11.5%
Sustained increases in fuel and energy prices, supply chain issues and labour shortages the main drivers of inflation
“Inflation likely to increase by up to 4% in the first half of this year”
Friday 24th February 2023: A new report by the Society of Chartered Surveyors Ireland (SCSI) shows that while construction costs are continuing to rise, the rate of increase eased significantly in the last six months of 2022.
The latest Tender Price Index published by the SCSI shows the rate of commercial construction inflation increased by 4% in the second half of 2022, down from a record high of 7.5% in the first six months of the year.
According to the SCSI’s Tender Price Index, which is the only independent assessment of commercial construction tender prices in Ireland, the annual rate of inflation from January 2022 to December 2022 was 11.5%, down from 14% in the preceding year.
The report indicates some variation across the regions with a higher rate of inflation of 5% recorded in the Rest of Leinster and Connacht / Ulster while the median rate in Dublin and Munster is in line with the national figure of 4%.
Fig 1. Construction Tender Prices 2010 – 2022 Research for the latest edition of this sentiment survey, which is based on responses from Chartered Quantity Surveyors from all round the country, working on commercial projects, was conducted in January 2023.
Kevin Brady, Chair of the Quantity Surveying Professional Group in the SCSI said that while the sustained rate of increase is still substantial, the reduction in the rate of increase – which the SCSI predicted at the time of the last report – was a welcome development.
“The easing of the rate of tender price inflation seen in the last six months of 2022 is due to fuel and energy prices abating toward the back end of the year coupled with a slight easing of supply chain issues. These changes have contributed to the more moderate fluctuations in material prices that Ireland has been experiencing since 2021.”
“While the hope would be that the downward trend will continue this year, 4% is still a high figure and it’s clear the effects of Russia’s invasion of Ukraine – particularly with regard to increased fuel and energy costs – continues to dominate the market.”
“Material price increases are expected to continue to fluctuate with rises likely until there is a marked decrease in the cost of electricity, gas, and other fuels. Materials which are energy intensive to produce such as aggregates, plasterboard, insulation, and plastic ducting are continuing to experience price rises into 2023. On the domestic front, the main elements which are continuing to drive inflation are high construction activity demand and construction labour shortages.”
The President of the SCSI, Kevin James, said that while it was difficult to accurately predict future tender rates given current market and geo-political uncertainties, chartered quantity surveyors believe national tender price inflation is likely to increase by up to 4% in the first half of this year.
“While there are signs the rapid rate of construction inflation has peaked, it is also likely the increased costs of fuel and energy will continue to impact manufacturers for the foreseeable future. The SCSI Tender Price Index has risen by a record 26% over the last two years and concern remains as to how long it will take for inflation to fall to more acceptable levels”.
“Economic headwinds and market uncertainty may well help in that regard and given that investment plans in the commercial sector have been significantly impacted by viability and funding challenges its likely we will also see more competitive tendering activity later this year.”
“While these developments look set to dampen inflation, anecdotal evidence suggests that investors are likely to adopt a cautious approach in the short term as they seek to navigate an increasingly difficult and complex market.”
The full report is available here.
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Note to Editor
Methodology and Use of Data Notes
The Index is the only independent assessment of construction tender prices in Ireland. It is based on the responses of 160 Chartered Quantity Surveying members of the SCSI who undertook the survey in January 2023. The Tender Price Index (TPI) H2 2022 is based on sentiment returns only. The TPI is for non-residential projects during the period in question. It is based predominately on new build projects with values in excess of € 0.5m and covers all regions of Ireland.
The Index relates to median price increases across differing project types and locations. The SCSI uses median values rather than averages, as this gives a more accurate reflection of the responses it receives. It should be regarded as a guide only when looking at any specific project, as the pricing of individual projects will vary depending on such factors as their complexity, location, timescale, etc.
It is important that the TPI report is used appropriately and not for all construction projects, including those in the residential sector and those below €0.5 million. The Tender Price Index H2 2022 provides median reported figures across all project tiers. Breakdowns by tier may vary. Project specific advice should be sought from a Chartered Quantity Surveyor before deciding an appropriate TPI provision for individual construction projects.