A new report has found that the average cost of building a two-bed apartment has increased by 14% since before the pandemic started.
The study by consultants Mitchell McDermott estimates the cost of construction of a mid-range two-bed apartment is now €219,000, up €26,876 since the pandemic began in early 2020.
The company calculates that including these costs, as well as indirect costs, parking areas and VAT, the total price of building such a dwelling is now €440,000.
It also predicts that the price could rise up to 3% or €6,000 more this year, if particular cost drivers materialise.
The largest driver of the recent increases has been raw materials, which have jumped in price due to supply chain disruption caused by Covid-19.
The cost of timber has risen up to 86%, windows have climbed 61%, steel is up 52% and sanitary is 20% higher.
In general construction inflation averaged out at 10.7% last year, a three-fold increase on the 3.4% registered in 2020.
The company predicts that building costs will continue to climb this year, rising by a further 6-7%, or possibly more, as a result of the war in Ukraine.
"One would expect a lot of the cost spikes to correct themselves in the short to medium term once supply chains return to normal," said Paul Mitchell, director of the firm and a co-author of the report.
"That said the situation in the Ukraine will cause additional supply chain issues for certain materials."
The report also points to delays in the construction of housing caused by judicial reviews of Strategic Housing Developments (SHD).
The authors found that the number of such reviews rose by 30%, leading to more than half of the 26,151 units that were granted planning permission last year under the SHD system being delayed.
"While the country aspires to build more houses, the harsh reality on the ground is it's just not going to happen unless we reform the planning process," said Mr Mitchell.
"The SHD process has been in place for four years and in that time 30% - or some 28,000 units – have been stalled in JRs."
"A new 'Large-scale Residential Development’ (LRD) planning system has just been introduced, but JRs will continue to be a feature and at this point there is nothing to suggest anything is going to change. That is a real concern."
Mr Mitchell added that if restrictions on build-to-rent developments or on the proportion of units that can be rented in new developments come into force, as proposed by some local authorities in the capital, it will also seriously damage supply of new housing.
In total, 20,000 homes were built in Ireland last year, of which one quarter were apartments.
Mitchell McDermott estimates that 25,000-30,000 units will be built this year, rising to the 35,000 that most analysts believe is required annually by 2024 or 2025.
"The caveats to that would be that we have a sustained effort with no surprises or changes in regulations," Mr Mitchell said.
"We will also need 10 to 15,000 more construction workers and sourcing those will be a challenge."