26

Apr

2021

New figures show national construction tender prices increased by modest 1.3% in second half of 2020

Surveyors say national annual inflation now at 2.2%, about a third of pre-Covid-19 levels

– SCSI President says property, land and full construction sector are intrinsically linked and need to reopen as soon as possible

The latest Tender Price Index published by the Society of Chartered Surveyors Ireland shows that construction price inflation increased by just 1.3% in the second half of 2020, a modest increase on the 0.9% 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 to 2.2%, significantly below the pre-Covid tender price inflation level of 6.3% in 2019.

While the highest rate of inflation in H2 2020 was recorded in Connacht Ulster at 2.1% the lowest was in Leinster excluding Dublin at 0.5%. The rate in Dublin and Munster was 1.5% and 1.1% respectively.

The survey, which is based on a combination of a member sentiment survey and tender returns, was conducted in February when construction activity was halted.

Tomás Kelly, Chair of the Quantity Surveying Group in the SCSI said the figures reflected the massive impact Covid-19 is continuing to have on the construction sector.

“While national tender price inflation had begun to moderate in late 2019, Covid quickly became the dominant issue leading to a further reduction in these figures in H1 2020. While the second half of 2020 saw a slight upward shift in tender inflation sentiment, this was largely due to the reopening of the sector following the easing of Covid restrictions during the summer. From then until Christmas our members reported that the sector was highly active with many public and private projects advancing to tender and contract stages.

“However, the closure of the sector in early 2021 has significantly dampened activity over the last number of months, with the full effects not likely to be reflected in our index until mid-summer.  The impact of the ongoing partial lockdown is likely to slow the return to normal construction activity over the coming months. The lockdowns and the continuing fall-out from Brexit also make cost predictions more challenging but based on what we are seeing in the market and certain material price increase on steel and timber products, our forecast is that inflationary pressure will be in the range of 1% to 2% for H1 2021” Mr Kelly said.

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Fig 1. Construction Tender Prices (2010 – 2020)

Micheál Mahon, President of the SCSI, said it was vital all the property, land and construction sectors reopened as soon as possible.

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Micheál Mahon, President of the SCSI

“The property, land and construction sectors are intrinsically linked with the property sector providing a significant source of funding for construction. While the construction sector has been partially reopened – and we hope to see it fully reopened in the near future – the property sector has been subject to Level 5 ‘plus’ restrictions.

“We want to see a return to ‘normal level 5’ restrictions for the sector as soon as possible.  We are not seeking a wide re-opening at this stage, merely a removal of the additional level of restrictions regarding viewing that were imposed in January. A concern that we have communicated to Government is that the current roadmap for phased reopening makes no mention of property, although it is still deemed an essential service. This needs to be addressed forthwith.

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“We know the closure of the construction sector will have a huge impact on house completions. At the same time, limitations on viewing are resulting in vendors withholding properties, which is further exacerbating the supply situation and driving house prices higher. The Covid protocols which the SCSI and other stakeholders drew up worked very effectively previously and it is now time to enable people employed in the property, land and construction sectors to return to what is a safe working environment,” Micheál Mahon concluded.

 

Figure 2 Index numbers since 1998 

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