Costs Stabilise While Trade Shortage Drive Inflation

Uncover the latest insights from Irish chartered surveyors on building material costs. Trade shortages are the key influence on construction inflation.

Building material costs remain high, but recent data from Irish chartered surveyors reveals a significant easing, dropping to 1.5%. The latest Tender Price Index (TPI) by the Society of Chartered Surveyors Ireland (SCSI) indicates a notable reduction from 2.4% in the first half of 2023, signalling positive trends in the construction sector.

The annual median national inflation rate for 2023 also witnessed a decline, reaching 3.9%, down from the 11.5% recorded in 2022.

While stabilising building material prices, reduced energy and fuel costs, and increased market competitiveness contribute to this positive shift, the report highlights persistent challenges, with labour-related issues at the forefront.

Kevin Brady of the SCSI emphasises that rising labour costs are the main driver behind recent cost increases, attributing the challenges to shortages of skilled trade professionals and frequent increases in financing costs. The tight conditions in the labour market pose a significant obstacle for the construction industry.

The report reveals regional variations, with Leinster (excluding Dublin) experiencing a higher median rate of inflation at 2.2%, while Dublin recorded a 1.5% increase. Connacht/Ulster and Munster reported increases of 2% and 1%, respectively, with Munster showing a decrease from 3% in the first half of the year.

The shortage of skilled tradespeople and pressure from the cost-of-living crisis are cited as the key factors driving labour inflation, resulting in increasing wage demands within the construction sector.

Despite these challenges, the easing inflation rates suggest a positive trend, albeit with the labour market remaining a major focal point for industry professionals.

In addition to labour-related concerns, the report notes that falling energy costs have contributed to a decline in the national Consumer Price Index, which fell below 3% in January.

The Central Statistics Office (CSO) reports a 2.7% average price increase over the past 12 months, down from the 3.2% rate recorded in December.

Energy prices are estimated to have decreased by 0.8% in the month and 7% over the 12 months to January, providing further relief to the construction industry.

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