Strong production expected for the construction sector despite supply problems

Despite macro-economic and geopolitical pressures that have led to a sharp rise in building materials, the outlook for the construction sector as a whole is cautiously optimistic, according to a report from EY.

They said this was largely due to a strong economy, a vibrant labor market and a remarkably resilient public sector balance sheet.

Their report estimates the value of construction output at €29.1 billion for 2022 in Ireland. Despite inflationary pressures, production volumes in the construction sector are expected to increase by 4.9% in 2022 and 4.1% in 2023.

Housing completions forecast at 25,000 by 2022; 27,000 in 2023; and 32,000 in 2024; but rising construction costs combined with material and labor shortages remain a major challenge to housing supply

Construction volumes are expected to increase by 4.9% in 2022, followed by further growth of 4.1% in 2023.

This growth is expected despite construction inflation which is projected to average 10% in 2022 and 6% in 2023.

Preliminary projections for 2024 call for construction output volumes to increase by 5.4% in 2024, after inflation moderates to 4%.

The above projections generate a value for construction output of €29.1 billion in 2022 compared to €25.2 billion in 2021.

The volume of construction activity in 2023 and 2024 is projected at 27.5 billion euros and 29 billion euros respectively[1]. In nominal terms, the value of construction output is projected at €35.2 billion in 2024, which would correspond to 6.7% of GDP, compared to 6.2% of GDP in 2022.

Supply chain issues

Commenting on the report, Annette Hughes, Director at EY Economic Advisory, said: “Following subdued construction activity in 2020 and 2021 due to the pandemic, the industry started the year with cautious optimism and hard work. to do.

“The recovery, however, has been variable across sectors and set against a challenging market backdrop linked to inflation and supply chain issues. The excessive price increases recorded in 2022 so far weigh, for example , on the cost of delivering certain infrastructure projects to the NDP, as capital budgets for the year are already determined.

She said housing remains a key political, economic and social issue.

“With the largest housing investment program ever planned for the state under the Housing for All (HfA) plan. Combined with the additional demand resulting from the influx of conflict-displaced Ukrainians, the confluence Current factors create a very difficult housing market,” she said.

For 2022, the report forecasts 25,000 completions, down from 20,473 in 2021. There has been a downward revision to housing supply projections for 2023 and 2024, with completions forecast at 27,000 in 2023 and 32 ​​000 in 2024.

These projections are below the Universal Housing targets of 29,000 and 33,450 respectively and reflect a combination of factors including planning delays, land servicing, longer delivery time due to an increase in of apartments as well as the escalation of construction costs, which has an impact on the viability of certain projects.