SCSI / PwC Construction survey reveals confidence and challenges ahead

02 May, 2018

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The latest Society of Chartered Surveyors Ireland / PwC Construction Market Monitor has revealed that although over half of Ireland’s chartered surveyors experienced increased activity in the last six months,  skills shortages as well as planning and regulatory challenges are continuing to act as constraints on the sector.

The vast majority of the chartered surveyors polled expect construction activity to increase in the year ahead, while many surveyors outside Dublin say they’ve seen an increase in activity driven by a rise in private housing building and commercial construction.

Increased activity driving industry confidence

According to the survey, 71% of chartered surveyors have seen an increase in private housing over the last six months, an increase of 13%; Over two-thirds (68%) have seen an increase in private commercial, an increase of 10%, while 44% have seen an increase in infrastructure, an increase of 14%.

Kevin James, Chair of the Quantity Surveying Group within the SCSI, said: “While 4% more Dublin surveyors say they have experienced an increase in activity in the last six months the figure outside the capital is 11%. This is very heartening as it shows the recovery in the construction sector is gaining pace around the country.

“It’s also encouraging to see that one of the main drivers of the growth in activity is housing and given the current housing crisis increasing social and affordable housing numbers from what is an extremely low base is now a priority. The reported increase in infrastructure activity is also very welcome.

“Among the principal aims of the recently published Project Ireland 2040 Plan is the provision of balanced regional city development and a significant improvement in the State’s infrastructure. However, the Government will need to successfully integrate various departments if the vision in that Plan is to be realised.”

Pictured are (l-r): John Mulcahy, Glenveagh Properties Plc; Joanne Kelly, Real Estate Leader, PwC Ireland and Kevin James, Chairperson, Quantity Surveying Group, SCSI.

Skills shortages remain an issue

Despite several positive indicators, the survey also underlines the key challenges facing the sector. The number of surveyors experiencing skills shortages has increased by 7% in the last six months to 81%.

James said the skills shortage issue will have to be addressed in the short term.

“Quantity surveyors/commercial managers are in very short supply and the availability of skilled trades such as plasterers, carpenters, electricians, bricklayers and plumbing are an acute challenge.

“While 70% of surveyors expect headcount to rise in the year ahead – an increase of 9% - it remains to be seen where the additional labour will come from. It should also be borne in mind that high accommodation costs are a significant deterrent to overseas hires.

“SCSI members are experiencing the effects of the skills shortage first hand. One member reported that block laying costs have increased by 25% in the past six months. Another believes a lot of skilled trades are hesitant in moving across to residential from commercial contributing to the shortfall,” James said.

Finding finance becoming easier

While fifty-five per cent of surveyors say raising finance is an issue, this is down 13% on the previous six months.

Joanne Kelly, PwC Ireland Real Estate Leader said: “While a key challenge, the survey does highlight some easing in raising finance in the period March 2018 to September 2017.  Initiatives announced in recent months, such as the Home Building Finance Ireland (HBFI) fund, which is aimed at increasing access to finance for residential construction have helped.  However, respondents also indicated that cash flow, liquidity and delays in payments are also issues.

“Certain companies, particularly SMEs, are still facing difficulty in accessing reasonably priced finance. There remains a legacy from the downturn where construction companies had negative experiences or a poor track record with lending institutions. However, this seems to be more of an issue for regional and secondary projects”

Planning and regulation still a roadblock

Seventy-seven per cent of those surveyed said that they had experienced problems with planning and regulations during the last six months.  While this is the same as 2017, it means that planning and regulatory challenges have been identified as the next biggest challenge after the skills shortage.

Kelly said: “While changes such as the fast track planning process for large-scale developments and the release of new regulation in respect of apartment design and planning have been introduced in an attempt to tackle planning delays and the cost of construction, it is too early to determine whether these Government initiatives are having a positive impact on the industry.”

Looking forward

The survey suggests a positive outlook for the year ahead for the Irish construction sector.  90% expect activity increases while 63% expect increased profits. 

Joanne Kelly concludes: “For an open economy that relies heavily on Foreign Direct Investment and exports, it is critical that we have the housing and infrastructure to support it.  While the report outlines some acute challenges, it is encouraging that plans have been outlined in Government’s Project 2040 Plan for significant infrastructure and housing investment.”

ENDS

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