Understanding Ireland’s Housing Construction Numbers

Earlier this week, forecasts for Ireland’s economic growth were sharply upgraded by the Department of Finance, with the domestic economy now expected to grow by 5.25 this year. This marks a doubling of the earlier growth forecast made in the summer. The unemployment rate forecast has also been cut, based on the improved outlook. This is not expected to be reflected in Budget 2022 announcements later this month.

Uncertainty remains. Covid-19 has left the Irish Government reeling, and they are not unique in this. As countries around the world struggle to regain some form of ‘normality’ (whatever that will look like), each industry is trying to regroup and move forward. This will be easier for some, and more difficult for others. Construction globally is battling on a number of different fronts, experiencing labour shortages, other resource shortages, and abnormally high construction costs increases. And yet, the latest Dublin Economic Monitor reports that house-building in Dublin “has returned to Celtic Tiger levels”, with house commencements in the capital climbing to over 5,000 in the second quarter of the year. However, nationwide, housing planning approvals dropped 15 percent across the first six months of 2021, with 11,138 apartments and 6,975 houses granted planning permission, according to the latest CSO figures.

<p”>Significantly, the long-awaited overhaul of Ireland’s planning laws took a big step forward this week as a review, which will be led by experts in planning law but supervised by the Attorney General, was sanctioned by Cabinet and announced by the Taoiseach, Micheál Martin. The intended outcome of the review of the Planning and Development Act of 2000 is a whole system overhaul to reduce delays in the delivery of housing and critical infrastructure, and thereby reduce costs, which is welcome. Reform of the misused judicial review process has already been initiated.

But all of this depends upon the construction industry’s ability to build and it has been a horrendous 18 months for most operators, who are continuing to navigate Covid restrictions, Brexit impacts, supply issues, labour shortages, inflation in the context of fixed price contracts and general building/project viability.

On the basis that materials account for somewhere in the region of 40 percent of the overall build costs, this is a huge problem. Last month, the Business Post published a list of price movement in construction materials from end of 2019 to June 2021 (based on market research by Sisk, presented at a SCSI CPD event), as follows:

• Softwood Timber 47%
• Plywood 55%
• Insulation 43%
• Rebar Steel 40%
• Mesh 40%
• Concrete 5%
• Bricks 16%
• Blocks 10%
• Ironmongery 20%
• Sanitary Ware 16%
• Steel 47%
• Plasterboard 14%
• Metal Stud 26%
• Copper 62%
• Steel Coil 82%

Compounding the above, there are critical shortages of timber (Ireland), steel (China) and insulation.

Offsite and other modern methods of construction, or MMC, are being positioned as the likely solution, however, there needs to be a serious ramping up of capacity for this to deliver of the 312,000 new homes by 2030, as committed to under the Housing for All plan.