Conor O’Connell: Munster construction can rebuild if the political will allows
The construction sector will continue to face challenges, but is optimistic of growth during 2021
As we leave 2020, we can only look forward to 2021 with optimism and hope.
Thankfully, the construction sector did not suffer the same degree - or length - of shutdown that other sectors of the economy suffered in 2020, but there was considerable disruption to activity especially in the earlier stage of the Covid pandemic.
New standard operating procedures were introduced but thankfully many sites were subsequently able to operate safely right throughout the various stages of the pandemic, to date.
The industry has a history of managing and working with risks on an everyday basis and so there is a strong culture of good health and safety compliance amongst the workforces.
Of course, some projects, especially larger high dense projects were significantly impacted in terms of cost increases, lower numbers on site, and subsequent productivity challenges. Several private sector projects have been put on hold indefinitely until there is greater clarity on the effects on the office and hotel sector in particular.
This will likely affect the larger contractors disproportionally in 2021.
Nevertheless, there are some grounds for optimism for the construction sector. The Government has committed a significant extra €1bn to the Public Capital Programme, has retained the help-to-buy scheme and introduced various affordable housing initiatives in the budget.
The increasing demand for construction services shows no sign of diminishing over the next decade and if we get it right the industry could be in for a significant period of growth. Population and employment growth, particularly around Cork and Dublin, is growing significantly.
It is impossible in any column addressing construction outlook for the year not to devote space to housing construction and all the related issues.
Unfortunately, the issue is now a political one, with, in some instances, projects being held up because of some politicians in local authorities basing decisions on a political philosophy rather than on practical consideration of supplying housing to people.
Most of the negative political sentiment towards housing construction has its base in the notion that the State can produce housing stock on public lands for considerably less than the private sector can produce housing for sale.
It has also been commentated on extensively that somehow State bodies or local authorities can get land for free and, therefore, the “key” to unlocking affordable housing is reducing or eliminating land costs. There is no such thing as free land.
We should also not forget the mistakes of the past when we delivered large numbers of social houses in inappropriate locations at inappropriate densities and inappropriate scale all over Ireland.
It has been an expensive mistake that in some locations many houses have been demolished, repurposed, or reconstructed due to the failure to have a more integrated and nuanced approach to social housing delivery on a scale and density that is appropriate.
While activity is increasing significantly in social housing construction, it will remain challenging for the industry to provide more affordable and private housing. The Central Bank's macro-prudential rules limit the amount people can borrow and are the most stringent in Europe.
There is a scarcity of zoned and serviced land available to builders, there has been limited capital expenditure on water and wastewater infrastructure in recent years, and an increase in regulatory costs.
The help-to-buy and shared equity schemes will be significant and the industry will deliver if practical measures are introduced to provide people with the ability to purchase their own home.
Apartment delivery and high-density residential delivery continue to be the greatest challenges to achieving that greater mix we need in our housing policy.
They cannot be built in stages, there is limited mortgage availability for purchasers and there is no rent to justify the yield investors require. This is unlikely to change in 2021 and it is difficult to envisage any significant apartment developments anywhere outside of certain Dublin postcodes.
We need greater honesty and acceptance about the delivery costs associated with residential delivery.
While challenges remain, supply is increasing and there is a growing range of policy instruments which can and will yield results for all residential sectors.
It’s time to forget the political philosophies and continue with practical measures that yield results.
- Conor O’Connell is southern region director of the Construction Industry Federation
