T he uncertainties caused by the conflict in the Middle East and the knock on to higher inflation has led to some slowdown in housebuilding. Evidence for this comes in a survey by AIB of purchasing managers in the sector. The impact of fuel protests on deliveries last month was also a factor.
The survey shows a reading of 47.1 for the overall construction sector, down from 53.4 in March. This is significant, as a figure below 50 indicates contraction. The weakest part of the sector was housebuilding, where the Government is desperate to see an increase in activity this year.
Input costs are increasing at the fastest rate since just after the all-out Russian invasion of Ukraine while uncertainty about the economic impact of the Middle East conflict is also a factor. Firms continue to build up supplies – concerned about further supply disruptions or higher prices – and so may stick to their original plans if conditions do not deteriorate further. But higher costs will pose a challenge both to their strategies and to the Government plans for the sector in 2026.
Already some of these are evident. For example, the cost rental sector, a vital element of Government strategy to provide rental properties affordable to those on average incomes, is under pressure. The rising cost of building – and particularly maintenance – are making it difficult, or in some cases impossible, to set a rent which both meets the costs of the scheme and is affordable. The cost of renovating properties is also a barrier to local authorities seeking to acquire properties and invest in them for social housing.
RM Block
In time, incomes and tax payments to the Government, may adjust. But for now rising costs are an unwelcome addition to the existing list of challenges to accelerating housebuilding and the provision of new homes. Already, Government investment in housing has reached unprecedented levels – likely to exceed €9 billion this year in State spending and subsidised finance. Higher costs will put pressure on it to spend yet more. Against this backdrop, ensuring efficiency and value for money becomes ever more important.
