The latest Tender Price Index published by the Society of Chartered Surveyors Ireland shows that construction tender prices increased by 2.9% in the second half of 2016.
The Society’s research found that prices increased by 6.3% for the year as a whole.
In recent years the trend with tender prices has been one of consistent increases – they rose by 5.5% last year and 5% in 2014 – and the SCSI is predicting that this will continue in the short term with a rise of 3% forecast for the first half of 2017.
While the index relates to non-residential construction projects the SCSI said it was inevitable that rising prices would have a knock on effect on house building costs.
Fig. 1 Construction Tender Prices Index
Micheal Mahon, Chairman of the Quantity Surveying Professional Group of the SCSI said that while the rate of increase is higher in Dublin, price inflation is also now being experienced in the regions.
“The continued rise in tender prices is reflective of the increasing level of construction activity across the country, most notably in the Greater Dublin Area (GDA), where tender price inflation was 3.4% in the last six months of 2016. Outside of Dublin the figure was 2.5%. This is in line with expectations as construction activity continues to increase year on year albeit from a very low base. For the first half of 2017 we are forecasting a similar trend with prices rising at 3.3% in the GDA and 2.8% elsewhere.”
“It would appear that there is an increasing amount of construction activity being undertaken in the regions as well as a migration of contractors and labour towards the GDA, particularly from the ‘commuter belt’ counties, resulting in fewer resources within the regions to undertake construction works. This has led to a shortage of resources across multiple trades for both main contractors and specialist sub-contractors” he said.
Mahon said it was inevitable that the rise in tender prices would lead to a knock on effect on house building costs.
“Previously the SCSI highlighted its concern in relation to the upward pressure on building costs. Whilst this tender index relates to “non-residential” construction, the industry must be viewed holistically and the increasing pressure on resources in the commercial sector will have an obvious “knock on” effect on the residential house building sector and the cost of delivery of housing” Mahon concluded.