Housing crisis will only deepen as skills shortage hits home
Why the dearth of specialist trades and property professionals will result in increased construction costs and impede development
While stories about the number of cranes over Dublin - 70-plus apparently - make headlines and reassure people that the recovery is continuing apace, the fact that many of the construction companies, or more specifically, their subcontractors, are struggling to hire skilled trades' people and construction professionals remains under the radar.
Skilled craft workers such as plumbers, plasterers, specialists in the mechanical and electrical services and curtain walling as well as professionals such as quantity surveyors and engineers, are in particularly short supply, especially in the Greater Dublin Area.
At the same time, due to the continuing growth in demand within the industry and the growth projections for the coming years - which include not one but two children's hospitals - nearly two-thirds (63pc) of respondents to a recent survey conducted by the Society of Chartered Surveyors Ireland (SCSI) in conjunction with PwC said they still plan to expand their workforce in the year ahead. With an increasing number of companies chasing a small pool of labour resources, this will obviously result in inflationary pressure on wages, particularly for those with the skill sets in greatest demand. So who will fill these vacancies and where will they come from?
A number of short term solutions, such as sourcing labour from abroad for qualified trades, is an option being pursued by some companies. For example, supply chain managers are trying to recruit specialist trades from Eastern Europe. And some gypsum product manufacturers are providing a facility in Ireland to train new trades and apprenticeships are increasing, albeit not at the pace required.
If workers are recruited from abroad, where will they live? It is clear we are well behind targets for new house completions. With a 62pc surge in mortgage approvals recorded in the first three months of 2017 compared with the same period last year, coupled with stubbornly low house completion figures, property price inflation, including rents, is set to increase further. This is proving a disincentive in efforts by companies here to attract those who emigrated during the recessionary years.
The SCSI has continually called for measures to be introduced to tackle high costs of residential construction with a view to increasing the viability of same and increasing supply.
An SCSI report published last year highlighted the fact that 55pc of the overall delivery cost of housing is made up of 'soft costs' such as levies, VAT, Part V and costs associated with raising finance. We have continuously stressed that this is too high and extra efforts must be made to reduce this cost.
The obvious effect of the skills shortage, if it is to continue, is the inflationary pressure it may bring to bear on tender prices for construction works. From the SCSI Tender Price Index we know construction prices are rising on average by 6pc a year. It must be noted that the Greater Dublin Area is experiencing a higher rate of inflation than the regions.
While our tender index relates to 'non-residential' construction, we are of the view that the industry must be viewed holistically and that the increasing pressure on resources in the commercial/non-residential sector will have an obvious 'knock-on' effect on costs within the residential building sector.
The industry itself needs to radically review how it undertakes its business. Increased utilisation of technology in the design process and in the construction stages though pre-fabrication are being reviewed and increased adoption of same can be expected over the coming years. In addition the SCSI has been a long time advocate of the appointment of a Minister for Construction to ensure a sustainable level of output for the sector over the long term. And it still is.
But whether the Government goes that route or not, the skills shortages being experienced coupled with the increased demand within the industry will undoubtedly lead to further delays and increased costs to housing, infrastructural and commercial developments.
- Micheál Mahon is a Chartered Quantity Surveyor and MD of MGM Partnership which has offices in Dublin and Wexford