Despite macro-economic and geo-political pressures that have led to a sharp rise in construction materials, the outlook for the construction sector as a whole is cautiously optimistic, according to an EY report.
They said this is largely down to a strong economy, buoyant labour market and a remarkably resilient public sector balance sheet.
Their report estimates the value of construction output at €29.1 billion for 2022 in Ireland. Despite inflationary pressures, output volumes for construction sector are projected to increase by 4.9 per cent in 2022 and 4.1 per cent in 2023.
Housing completions forecast at 25,000 for 2022; 27,000 in 2023; and 32,000 in 2024; but rising construction costs combined with material and labour shortages remain key challenges to housing supply
Construction volumes are projected to increase by 4.9 per cent in 2022, followed by further growth of 4.1 per cent in 2023.
This growth is expected despite construction inflation which is projected at 10 per crnt on average in 2022 and 6 per cent in 2023.
Preliminary projections for 2024 are for an increase in construction output volumes of 5.4 per cent in 2024, after a moderation in inflation to 4 per cent.
The above 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[1]. In nominal terms, the value of construction output is projected at €35.2bn in 2024, which would correspond to 6.7 per cent of GDP, compared with 6.2 per cent of GDP in 2022.
Supply chain issues
Commenting on the report, Annette Hughes, director at EY Economic Advisory, said: “Following subdued construction activity in 2020 and 2021 due to the pandemic, the industry commenced the year with cautious optimism and much work to be done.
"Recovery has however been varied across sectors and is set against a challenging market backdrop related to inflation and supply chain issues. The excessive price rises experienced in 2022 thus far are putting a strain on, for example, the cost of delivering some of the infrastructure projects in the NDP, as capital budgets for the year are already determined.”
She said housing remains a core political, economic and social issue.
"With the largest planned housing investment programme ever in the State under the Housing for All (HfA) Plan. Combined with the added demand from the influx of Ukrainians displaced by the conflict, the current confluence of factors is creating a very challenging housing market," she said.
For 2022 the report forecasts 25,000 completions, up from the outturn of 20,473 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 and reflect a combination of factors, including 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.
