New SCSI Tender Price Index figures show national construction tender prices increased by 7% in first half of 2021 

New SCSI Tender Price Index figures show national construction tender prices increased by 7% in first half of 2021

Chartered Surveyors say national annual inflation now at 8.3% almost double pre Covid levels

SCSI says sharp rise is due to pent-up demand post Covid, supply chain constraints, exceptional increases in materials and labour shortages

“The last time we saw comparable rates of tender inflation was in 2000, at the height of the Celtic Tiger……however we believe the current situation is fundamentally different”

Monday 11^th October 2021: The latest Tender Price Index published by the Society of Chartered Surveyors Ireland shows that construction price inflation increased by 7% in the first half of 2021, a sharp increase on the 1.3% recorded in the previous six months.

According to the SCSI’s index – which is the only independent assessment of commercial construction tender prices in Ireland – this brought the national annual rate of inflation – July 2020 to June 2021 – to 8.3%, almost double pre-Covid levels.

The figures indicate significant variation across the regions in the first half of the year with the highest rate of 7.8% being recorded in the Rest of Leinster and Connacht/Ulster. The rate in Munster was 6.3% while the lowest rate of 6% was recorded in Dublin.

Fig 1. Construction Tender Prices 1998 – 2021 The survey, which is based on a member sentiment survey, was conducted in August 2021. The SCSI said the latest figures are based on median values rather than averages, as this gives a more accurate reflection of the responses it receives.

Kevin Brady, Chair of the Quantity Surveying Group in the SCSI said pent-up demand post Covid coupled with supply constraints has led to exceptional increases in material costs.

“Following the reopening of sites on April 12^th it was generally expected tender price inflation would rise as the economic recovery gained momentum. However, the scale of the increase is much greater than anticipated due to supply chain issues and intense competition internationally for building materials.”

“This has led to exceptional increases in the cost of widely used materials such as steel, timber and insulation products. These increases, coupled with serious labour shortages in the domestic market, have led to unprecedented disruption and the current increase in overall tender price inflation.”

“Higher cost increases have been recorded outside of Dublin. This is because costs around the country are coming off a lower base coupled with a strong recovery.”

Kevin James, Vice President of the SCSI said that while it was difficult to accurately predict future tender rates, chartered quantity surveyors do expect material price increases to ease into 2022.

“The last time we saw comparable rates of tender inflation was in 2000, at the height of the Celtic Tiger. While that highlights the seriousness of the current situation, we believe underlying market conditions are fundamentally different from that era and that as the global recovery gains pace post Covid, the cost of materials should ease. Given they account for up to half of overall delivery costs in some instances, a return to more normalised costs for key construction inputs such as timber, insulation, glazing, piping/ducting and steelwork appears likely and will be very welcome.”

“We would also anticipate that as the recovery gains pace and manufacturers gear up to meet demand, supply chain bottlenecks will be addressed. While the hope would be that international shipping charges will also come down and that logjams associated with Brexit will be sorted, labour shortages will take longer to address. So, although we expect a correction, it is very difficult at present to predict the extent of it and that is why the overall outlook remains uncertain.”

“While we have no control over international markets or shipping costs, we would urge Government as it prepares to announce details of Budget 2022 to address issues within our control. These include issues such as delays related to the planning process, unwieldy public procurement procedures, ringfencing finance for essential infrastructure such as water,

addressing the backlog in forestry permits in the Dept of Agriculture and attracting more young people into apprenticeship schemes. For its part the construction sector, if it is to drive down costs, needs to prioritise innovation and apply sustainable building practices.”

“While the SCSI Tender Price Index is concerned with commercial construction projects only its clear the cost increases outlined here will also affect the cost of delivery of new homes as well as refurbs and extension to existing homes. Given the well documented affordability and viability challenges faced by the new home sector, these increases underline the need for the Government to urgently address barriers to new housing delivery, especially with regard to planning and procurement issues.”

Ends.

For more information

Contact Kieran Garry

GPR Communications

087/2368366

kierangarry@gprcomms.com 

Note to Editor

Methodology and Use of Data Notes 

The Index is the only independent assessment of construction tender prices in Ireland. It is compiled by Chartered Quantity Surveying members of the SCSI. The Tender Price Index (TPI) H1 2021 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. 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 H1 2021 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.

Figure 2 Tender Price Index numbers since 1998