Despite the sharp rise in materials, an EY Economic Advisory analysis is cautiously optimistic about the prospects for Ireland’s construction industry for the next three years. 

Construction volumes are projected to increase by 4.9% in 2022, followed by further growth of 4.1% in 2023. This growth is expected despite construction inflation which is projected at 10% on average in 2022 and 6% in 2023.

The projections generate a value for construction output of €29.1bn in 2022 versus €25.2bn in 2021.

The volume of construction activity in 2023 and 2024 is projected at €27.5bn and €29bn respectively.

In nominal terms, the value of construction output is projected at €35.2bn in 2024, which would correspond to 6.7% of GDP, compared with 6.2% of GDP in 2022.

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For 2022, the report prepared for Euroconstruct forecasts 25,000 dwelling completions, up from the outturn of 20,470 in 2021.

There has been a downward revision of the housing supply projections for 2023 and 2024, with completions forecast at 27,000 in 2023 and 32,000 in 2024.

These projections are below the Housing for All targets of 29,000 and 33,450 respectively.

EY says this reflects delays with respect to planning, the servicing of lands, the longer delivery time due to an increase in the number of apartments, as well as the escalation in building costs, which is impacting the viability of some schemes.

Director Annette Hughes commented: “Although recent data show a substantial increase in the number of units granted planning permission - almost 43,000 in 2021 of which 60% were for apartments - there are constraints on the supply side in converting these permissions to completed units, such as a lack of services and other infrastructure to enable development.”

The report also notes concerns over the capacity of the construction industry to deliver the unprecedented scale of public capital investment planned, which is projected at €35.4bn over the three years from 2022-2024.

The availability of skilled labour is an additional challenge given competing demands from the new build and retrofitting sectors.

In the non-residential sector, the report notes that almost 12 million square metres of new non-residential buildings were granted planning in the last five years. The main concern in the current environment is whether these permissions will progress due to the downside risks for projects around building cost inflation and supply chain disruptions. 

Hughes added: “One of the four pillars in the Housing for All plan is focused on increasing supply, including a number of schemes designed to activate zoned lands and existing planning permissions, which will be essential in addressing the issue head on.

“There are also a number of subsidies and grants designed to unlock the potential in the market. This multi-pronged approach should be welcomed, and with ongoing input from both industry and government it will hopefully make it possible to expedite delivery and deliver much needed supply.”