Prices for building materials are rising at their highest rate since October of 2023, according to the Department of Finance.
In a statistical release published earlier this week, the Department outlined that, during February, the wholesale price of construction materials jumped by 1.8 per cent. This compares to an increase of 1.5 per cent in January.
“This is the highest rate of materials inflation since October 2023,” the Department reported, adding that “upside risks have increased due to geopolitical developments”.
Meanwhile, the capital goods price index, which measures the cost of inputs and wages was up 2.6 per cent.
RM Block
While officials in the Department said this partially reflected improving construction sentiment within the EU, it outlined too that geopolitical tensions and skill shortages “could also push costs higher in the near term”.
The report argues that record commencement notices in 2024 – which were in large part due to a rush to take advantage of development levy waivers due to expire in the early part of that year – should support home completions this year.
But it says that “further gains and activation of dormant [planning] permissions will be required to move toward 2030 housing plan goals”.
The Coalition has committed to building 300,000 homes by the end of 2030, although it axed annual targets from its new housing plan published last November.
While housing figures were stronger last year than had been expected – coming in at more than 36,000 new homes – the ESRI has warned that, with completions expected to remain in the mid 30,000s for this year and next, homebuilding remains below the level needed to bridge the gap between housing demand and supply.
This may be impacted further by a wave of inflation stemming from the war in the gulf, the think tank reported in March
“Recent energy price spikes could act to put downward pressure on housing output,” the ESRI wrote in its quarterly economic outlook, published last month.
Earlier this week, the Government agreed to include the construction sector in its latest fuel support package.
In the wake of widespread protests earlier this month, the Coalition had agreed in principle to extend new schemes to hauliers, farmers and other sectors impacted by rising fuel costs. However, it was unclear if large vehicles used in construction contractors and quarry truck drivers would benefit. It was confirmed following a Cabinet meeting this week that vehicles considered essential for construction will be included.
The construction industry welcomed the news. It had been arguing both in public and behind the scenes that it was being hit with the effects of a global oil price shock arising from the conflict in Iran.
The Department outlines that improving supply in Dublin is leading to a lower level of price inflation for residential property in the capital. However, prices are still climbing both inside and outside the M50, with Dublin prices growing by 6.1 per cent on an annual basis measured in January, while inflation was stronger in all areas excluding the capital higher by 7.7 per cent.
It outlines that in the near term, the “structural shortage of supply/income growth nationally will continue to support above trend price growth”.
