Construction price inflation surges to 13% and expected to rise further

Inflation expected to continue this year

High price volatility remains across a range of building materials, particularly insulation, cement, plasterboard metals, fuel along with labour shortages.

Construction inflation is now rising at a rate of more than 13% according to new research by the Society of Chartered Surveyors Ireland (SCSI).

They said the hike in construction material prices is due to the high level of activity in the industry to address the housing crisis plus a labour shortage caused by the pandemic.

According to the SCSI’s index, the national annual rate of inflation from January 2021 to December 2021 was 13.4%, up from 8.3% in the previous report.

“The main reasons for current price inflation are high price volatility across a range of building materials, particularly insulation, cement, plasterboard metals and fuel, labour shortages and the extremely high demand for projects across all tiers as the industry continues to readjust in the wake of the Covid crisis,” said Kevin Brady, chair of the Quantity Surveying Group in the Society of Chartered Surveyors Ireland (SCSI).

Figures from the SCSI’s recent Tender Price Report showed variation in price inflation in the second half of the year,  with the highest rate of 8% being recorded in the rest of Leinster while Connacht and Ulster recorded the lowest rate at 4%. The rate in Dublin and Munster was 6%.  

The SCSI expected material price inflation to ease in 2022. However, industry representatives expect the war in Ukraine to lead to further construction price inflation this year.

“Anecdotally, this easing of some material prices was becoming more evident in the second half of the year. However, Russia’s invasion of Ukraine, is expected to undo some of the expected easing of prices for the short to medium term, with the scale of increase very much dependent on the duration and outcome of the war,” said Kevin James, VP of the SCSI.

The SCSI has called on government to mitigate the impact of construction inflation on public projects by facilitating more balanced risk pricing, addressing planning permission issues, and improving public procurement procedures.