Down . . . down . . . down . . . three sectors on slide
Commercial development activity is falling sharply. Sean Gallup/Getty Images
The Irish construction industry looks set to suffer from a sharp drop in all three key sectors in 2009 as developers wait for signs of a pick-up in demand before starting new projects or later phases of projects already under way.
Already the forecast for output in 2008 is estimated to have fallen €8bn from the record €38.5bn seen in 2007.
Not alone is housing demand falling sharply, but so too is the commercial development activity.
Although the Government has resisted the temptation to halt capital spending, it has nevertheless severely cut it back.
But the outlook is not all doom and gloom. Interest rates are falling to near record lows.
The CIF is seeking a 10pc cut in wages and DKM economic consultants forecast that tender prices could fall by between 5pc and 10pc.
Furthermore, with development land being down valued by as much as 50pc, these factors may combine to attract developers who felt that development costs had gone too high.
Nevertheless, DKM forecasts that the industry could see a further 32,000 job losses by the end of next year. Employment had fallen to 257,300 by the end of September last.
It also expects housing output to drop to between 20,000 and 25,000 in 2009 -- that's a drop of 70pc from the peak seen in 2006.
While the consultants also forecast that industry output could drop to around €25bn for 2009, the Construction Industry Federation (CIF), on the other hand, believes this may prove too optimistic and has set its figure as low as €18bn to €20bn -- almost half the value of the 2007 output.
They also offer differing slants on the level of private sector commercial development with DKM opting for a 20pc drop in volume of this activity.
However, CIF says the value of such activity could be down by 30pc from the 2007 record to around €5bn to €6bn.
CIF's public affairs director Martin Whelan says this may vary. "Some projects have been mothballed but if there were signs of a return of confidence then they may be resumed."
Annette Hughes of DKM says that overall public sector output is expected to decline by around 1pc next year in volume terms but the civil engineering side, which includes roads and infrastructure, will be strong.
On the other hand "public building projects will be down apart from education", she adds.
But Martin Whelan says that public sector construction will see the value of its output drop by €2bn.
While he is also more pessimistic on housing and believes that only 20,000 new homes are more likely to be built, he recognises some signs for optimism.
"It all depends on the market. This in turn is down to confidence, investment and banking. On the housing side, affordability is improving and some banks are offering good packages especially for first time buyers following the falls in interest rates and the Government's tax reliefs," Mr Whelan said.
- Donal Buckley Commercial Property Editor
