Building costs 'could push house prices even higher'

The Deloitte report said that "ultimately there is a ceiling at which potential purchasers can afford to buy"

The Deloitte report also focuses on the shortages in supply of new housing following the lifting of the Covid restrictions on building sites last year. 

Worker shortages, along with price hikes for materials, are emerging rapidly as the Irish construction industry attempts to make up for lost time following the restrictions to commercial and housebuilding sites during the Covid crisis, according to a report from Deloitte.

The study draws on a number of official figures and recent survey data to show what it describes as  "the surge" in building activity that has led to shortages of workers and higher costs, made worse from the disruptions to the supply chains as well as Brexit, across Europe. 

It also warns about the prospect for further rises in house prices. Citing the CSO's most recent data showing house prices increased by an annual 12.4% in September, Deloitte partner John Doddy warned that increased costs for the industry could push house prices even higher. 

Residential property prices rose by 12.4% in the year to Septemberhttps://t.co/GN5ywfwMrD #CSOIreland #Ireland #Housing #HousingConstruction #HouseBuilding #NewDwellings #PropertyPrices #HousePrices #PlanningPermissions #IrishBusiness #BusinessStatistics #BusinessNews pic.twitter.com/4Pq7EiahUw

— Central Statistics Office Ireland (@CSOIreland) November 15, 2021

And echoing the views of many other commentators, Mr Doddy pointed out that as developers seek to catch up on completing building schedules that "ultimately there is a ceiling at which potential purchasers can afford to buy".

Senior economists have warned in recent weeks that there is little to stop the housing market from pushing house price inflation even higher.  That would involve prices hitting a ceiling when they become unaffordable either under the Central Bank rules that are designed to limit the amount buyers can borrow from their mortgage or because properties will simply be just too expensive for most wage earners. 

The Deloitte report also focuses on the shortages in supply of new housing following the lifting of the Covid restrictions on building sites last year. 

It cited the fallout from the pressures: The recent findings of the Society of Chartered Surveyors Ireland that showed its construction tender index that tracks building costs had climbed 7% in the Republic in the first six months this year.

It also identifies the lower number of office projects under way since the onset of the pandemic.            

“There remains a reduced pipeline of office accommodation being brought to the market in the capital due to the cessation of building activity throughout the various lockdowns, which will likely result in increased rental levels as demand continues to grow as the economy continues to reopen," Mr Doddy said. 

More office projects are being built outside of Dublin, however.

"In the third quarter, one-third of large-scale office developments commenced in Dublin, while one-third commenced in the rest of Leinster and one-third commenced in the rest of Ireland," the study found.