11% decline in construction tender prices in a year, but rate is slowing

CONSTRUCTION tender prices have fallen by 11% over the last 12months as the sector continues to decline, new figures from the Society of Chartered Surveyors show.

The rate of decline is starting to slow down.

The latest index shows prices decreased 3.7% over the first six months of 2010, but that is almost half the fall in the second half of last year.

It also showed that by the end of the year tender prices had fallen 31.8% from their peak in the first half of 2007.

“The dramatic reduction in prices – now back to 1998 levels – reflects the ongoing decline in all sectors of the construction industry, with 80,000 workers having lost their jobs last year.”

The severe shortage of new projects has meant that contractors and sub-contractors continue to tender at well below cost and to underprice risk to secure work.

In its pre-budget submission the body called for a property tax based on valuers’ certificates as the fairest, simplest and most stable form of taxing property in Ireland.

Such a tax must be part of an overhaul of the tax system which must also include the zero rating of stamp duty for all property transactions for the next two years. It should also carry “a 10-year moratorium for those who have recently paid stamp duty, said the president of the SCS Peter Stapleton.

The severe shortage of new projects has forced companies to continue to tender for jobs at well below cost. Risk is also being underpriced “in order to secure work in an ever diminishing market”, he said.

If Government implemented SCS’s pre–budget recommendations it could take advantage of low prices while increasing employment and delivering much needed public infrastructure from schools to primary care centres.

A compelling need to widen the tax base now exists after the economy’s “over-reliance on stamp duty and this would give a sustainable and reliable source of income which we strongly believe should be ring fenced to enable local authorities to be self financing,” he said.

“For that same reason we also favour the introduction of water charges based on daily use,” Mr Stapleton said. He also called for 20% rent subsidy for companies involved in promoting the smart economy.

“Prices are low so a retrofit programme to upgrade the energy efficiency of the 1.2 million least efficient Irish homes would benefit householders to the tune of over €1,000 per annum while saving 30,000 construction jobs,” he said.