The construction sector is expected to continue its recovery this year with growth of just above 20% predicted by the international construction consultancy firm, Bruce Shaw. The company is estimating output levels at around €15 billion.
Derry Scully, Chairman of Bruce Shaw, said the European norm for a sustainable construction sector was for between 10 and 12% of GDP. "That would imply an output level of €20 - €24 billion, but the Irish industry is still well below that." The recovery has been evident in the capital for some time, especially in the commercial sector, but according to the Bruce Shaw report, that is beginning to spread outside the main cities.
But the housing sector is still not back at sustainable levels, as has been well documented. "We built 12,500 houses last year. The accepted number is 25,000 in order to meet demand. The sector is not in equilibrium. It's not viable to build housing on large scale right now," he said.
However, Derry Scully said it was not the costs of construction that was making the industry unattractive to developers. "The construction cost is only about 50% of the overall cost. The rest is accounted for by taxes, levies, land costs and fees," he explained. He said much of the building cost inflation was allowing the industry to recover from below cost selling that took place after the housing crash. "Building prices fell 35% from peak and they've recovered about 25%. Prices rose by 6% on average last year with a further 7% expected this year. But that's only bringing it back to levels in 2000," he explained.
Another pressure point on the industry is a potential skills shortage. "Employment in the sector fell to a quarter of the numbers. We're finding people and bringing them back from New Zealand and the Middle East. With oil prices and some infrastructure projects slowing down, that's a source of talent to bring back," he concluded.
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MORNING BRIEFS - Ratings agency Standards and Poor's estimates that more than 40% of mortgage borrowers here remain in negative equity - the amount of money they owe on a mortgage exceeds the value of the property it underpins. This comes despite a recovery in house prices in recent years, but prices are still well below where the were at the height of the market in 2007. It is loans which originated in this period that have the highest degree of negative equity at 59%.
*** Dublin based staff rostering platform, Bizsimply, has raised €2m in new investment. The company, which helps businesses to manage employee rostering and costs online, says it will use the new funds to expand its sales and marketing capability and plans to create 15 new jobs. And the workforce solutions company CXC Corporate Services is to create 30 new positions at a new service centre in Dublin. It will be the hub for its Europe, Middle East and Africa operations.
*** The European Central Bank is due to unveil the minutes of its latest policy meeting later today. It will give some insight into the thinking behind the decision to cut rates and boost the money supply. Minutes from the latest meeting of the US Federal Reserve indicated that it was the risk of a global economic slowdown that convinced members not to hike rates in March. The Fed raised rates for the first time in nearly a decade in December to the range of 0.25 to 0.5%. It indicated at the time that it would introduce four rate hikes this year but since revised that to two.
