Building price hikes ease 'significantly' to 1.5%

Labour costs are now the number one issue for the sector

Construction site labour inflation is being driven by a combination of a shortage of skilled tradespeople and pressure from the cost-of-living crisis. File picture: Denis Minihane

Construction inflation is still rising but the rate of increase has eased significantly, according to Irish chartered surveyors.

The Society of Chartered Surveyors Ireland said its latest Tender Price Index (TPI) shows the rate of commercial construction inflation increased nationally by 1.5% in the second half of 2023, down from 2.4% in the first half of last year. 

Its annual median national rate of inflation for 2023 was 3.9%, down from the 11.5% recorded for 2022.

Kevin Brady of the SCSI said the softening of the rate of increase is due to the stabilisation of the price of building materials, reductions in energy and fuel costs along with greater competitiveness within the market. However, he said the sector faces continual challenges with frequent increases in financing costs, shortages of skilled labour and rising labour costs. 

"Surveyors are consistently reporting the latter as the main driver behind the latest cost increases and the main challenge facing the industry at present," he said.

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The report indicates some variation across the regions with a higher median rate of inflation of 2.2% recorded in Leinster (excluding Dublin) and 1.5% recorded for Dublin. Connacht / Ulster recorded a 2% increase while Munster recorded inflation of 1%, down from 3% in the first half of the year.

"They say labour inflation is being driven by a combination of a shortage of skilled tradespeople and pressure from the cost-of-living crisis which is leading to increasing wage demands," he said.

Falling energy costs also led to the national Consumer Price Index falling back below 3% in January. According to the CSO, prices rose by an average of 2.7% over the past 12 months. This compares with a 3.2% rate for December. 

Energy prices are estimated to have decreased by 0.8% in the month and decreased by 7% over the 12 months to January.