Shortage of builders pushing house prices to Tiger levels

A SHORTAGE of builders is pushing up the cost of constructing houses to boomtime levels.

The cost of building a new property is predicted to rise by more than 6% this year, which will bring prices back to 2004 Tiger levels, according to the latest Tender Price Index published by the Society of Chartered Surveyors Ireland (SGSI).

Kevin James, chairman of the Quantity Surveying Professional Group of the SCSI, said wage pressures would continue to drive prices higher. He said: ‘The increased level of construction activity is leading to a shortage of resources across multiple trades for both main contractors and specialist sub-contractors.’

Mr James added that exchange rate fluctuations due to Brexit have also increased the cost of some materials.

‘Looking ahead the increasing pressure for wage increases in the industry will also drive tender prices higher,’ he said.

The highest hikes ‘reflect the increasing level of construction activity we are seeing across the country, but especially in the greater Dublin area,’ he said.

‘In Dublin, tender prices increased by almost 3% in the first six months, followed by Munster at 2.65%, the rest of Leinster at 2.56% and Connacht/Ulster only showing an increase of 1.5%.

‘For the second half of the year we are forecasting a rise, on average of 3.6% with Dublin again showing higher rates.’

Dr John McCartney, of estate agents Savills, warns the pressure on costs could put developers off starting new projects.

‘Builders only build if the ultimate sales price exceeds the cost of development, including the land, the labour, the materials and everything else.

‘At the moment in housing there isn’t enough development going on, which is de facto proof that, for some types of houses in certain locations, it’s not viable to do it.’

‘So if construction costs rise, that narrows the gap between the selling price and costs of development which makes it even less of an incentive to build.’