A recent survey conducted by BNP Paribas Real Estate Ireland has shown a decline in housing output last month, indicating that housebuilders may be affected by the rising costs of building products. The survey, which is based on purchasing managers working in the industry, revealed that output expanded in the commercial part of construction, including offices and industrial buildings, but fell for civil engineering. However, output contracted sharply in residential housing, showing a sustained decline in this area.
John McCartney, director and head of research at BNP Paribas Real Estate Ireland, expressed concern over the steeper slowdown in new home building, which he found surprising given the sustained rise in residential commencements since last November. He also noted that the intensification of cost pressures bucked the trend of the last 18 months, but was relatively slight.
The survey showed that input price inflation quickened in April from March, with little respite offered in terms of any easing in inflationary and supply pressures. The extents to which supplier performance worsened and input prices increased were greater than seen in March. Nevertheless, firms were optimistic in their outlook for the future.
The overall index for Irish construction posted a reading of 48.4, where a reading of 50 marks the difference between construction output expanding or contracting in the month. Housing activity posted the sharpest decline in April, with a reading of 42.8, while civil engineering also contracted with a reading of 46.4. Commercial activity posted a reading of 51.4, suggesting that growth in output in that area was at a moderate rate.
The survey revealed that the rate of input cost inflation has been on a downward trend since its peak in October 2021, but the rate of costs increases picked up slightly in April. Inflation of the rates charged by sub-contractors also quickened from March. This was despite the most sizeable worsening in their quality since the end of last year, according to BNP Paribas.
The findings of the survey indicate that the Irish construction industry is facing challenges, particularly in the residential housing sector. The rising costs of building products are impacting housebuilders, and input price inflation is increasing. Nevertheless, firms remain optimistic, and commercial activity is growing at a moderate rate. The industry will need to address these challenges to ensure continued growth and success.
