EY warns inflation is making it harder to deal with the housing crisis

The number of new houses built is set to increase over coming years but will still fall short of the Government’s targets, according to predictions published by EY’s economic advisory arm.

The firm estimates that house completions will rise to 25,000 this year, up from just under 20,500 in 2021. In a report compiled for the Euroconstruct industry forecasting network, EY estimates that completions will rise to 27,000 next year, and 32,000 in 2024, but these are still below the levels required to address the housing crisis as laid out in the State’s Housing for All plan.

EY warns that rampant cost inflation in the construction sector is affecting the viability of many schemes and the challenges impacting upon the housing crisis are “gathering momentum”. The firm estimates that construction inflation will reach 10 per cent this year, before slipping back to 6 per cent in 2023 and 4 per cent in 2024.

“Although recent data show a substantial increase in the number of units granted planning permission – almost 43,000 in 2021 of which 60 per cent were for apartments – there are constraints on the supply side in converting these permissions to completed units, such as a lack of services and other infrastructure to enable development,” said Annette Hughes, director of EY Economic Advisory.

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Overall construction output this year is estimated by EY at €29.1 billion, or about 6.2 per cent of the value of the economy as measured by gross domestic product (GDP). Construction output last year was valued at €25.2 billion, with much of the rise accounted for by inflation.

EY also raises doubts in its report about the capacity of the construction sector to deliver on €35.4 billion worth of public building projects planned between 2022 and 2024. “The availability of skilled labour is an additional challenge given competing demands from the new build and retrofitting sectors,” the firm says.