Government needs to act over soaring build costs due to planning delays and rising cost of steel and timber
Ministers are being urged to push capital spending and to examine measures to support the construction sector amid mounting concerns about building costs and the impact on home buyers.
Politicians are being warned to get building work started sooner rather than later on major projects or face paying out much more in future.
Costs of building materials, for instance, are rising rapidly and are predicted to get even dearer in future. If the State drags its heels in approving projects then they will become even more expensive.
Industry figures point to delays in the planning process as part of the problem, saying these were adding to overall costs at a time of rising prices of steel, timber and other materials.
Building material costs have surged in recent months, data from the CSO and the Society of Chartered Surveyors Ireland (SCSI) highlights.
Surveyors are also warning the full impact of the war in Ukraine has yet to be fully assessed.
SCSI vice president Kevin James said projects were increasingly becoming unviable because of planning delays. Cost increases over the period of any delay can push projects beyond what is affordable, he said.
“The Government now needs to support the industry through this chapter by pushing on with the capital expenditure programme. We have to accept there is an inflationary premium to be paid in the current market because we are in urgent need of housing and developments to progress,” he said.
“We are starting to see the green shoots of projects being fast-tracked, which is a real positive. Getting planning is only one part of the solution, because if there is a delay, that delay getting the planning now means there is 13pc more on the bottom line that wasn’t there before.”
Figures released by the SCSI last week assessing commercial construction tender prices showed annual inflation in the sector hit 13.4pc last year.
This tallies with CSO data showing rapid growth for key materials in the past 12 months. On average, steel products are up about 27pc compared to February last year, but some structural steel prices rose 80pc since the start of the pandemic because of significant energy cost increases and pent-up demand. Timber products rose 64pc last year. This compares to a modest 2pc growth a year earlier.
Mr James said last year’s growth was seen as “exceptional” and had been expected to level off before the war in Ukraine. He said the impact of the war has not been measured yet because of a lag in how data is collated, but it will become apparent in the coming months.
Examining how building controls are accommodated and altering the size of buildings were “low hanging fruit” in addressing the cost crisis, he said.
“There are two options, really. Are we going to pay more for construction projects or are we going to lower expectations and start drilling into whether we need to relook at our standards? I am not saying we need to compromise what we have but there is a certain point where you have to cut your cloth if you want to have projects viable,” he said.
Mr James pointed to costs as a result of building control rules, fire regulations and energy efficiency standards.
“All of those regulations are an absolute must in terms of an industry that needs to move forward, but to some extent they all carry premiums and it is just how do we find balance or where is there manoeuvrability in those,” he said.
“If you shrunk the footprint of the building by 2pc, you are saving money and you may have people who are unhappy you are compromising the footprint. But isn’t that better than not having a building at all?”
Others in the property sector warn rising costs are having a devastating impact on home buyers.
The Institute of Professional Auctioneers and Valuers (IPAV) said rising construction costs were making it more difficult for buyers to be given an early indication of how much a home is going to cost them.
IPAV chief executive Pat Davitt said builders were finding it difficult to give buyers a sense of the final cost of a new home.
“The uncertainty means when the person buying is trying to close the sale, if the price goes up, there is no guarantee the bank will still be in a scenario where it is willing to give them the extra money,” he said.
“The bank can only give them a set amount, three-and-a-half times their income, so the person buying the house might be left asking where they will find the extra 10pc or 20pc to close the sale. Some people are able to get it and some people aren’t.”