Rising costs threaten building projects

Inflation and rising interest rates threaten a slowdown in construction as they will hit some projects’ viability, quantity surveyors warn.

Recent trends show the hyperinflation that hit building materials over the last 18 months is levelling off, says Irish-based multinational quantity surveyor, Linesight.

However, the firm warns that “soaring inflation and interest rates” have left some sectors facing challenges raising funds, which is in turn hitting demand.

Stephen Ashe, senior director at Linesight, believes that a market correction is looming as some materials costs fall.

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“While Ireland is performing better than many EU countries, increasing energy costs and interest rates continue to be a major concern and are likely to impact the viability of some projects,” he says.

In the firm’s latest quarterly commodity report, Mr Ashe notes that these factors are hitting project financing, a trend his business expects to continue into next year.

Irish construction is poised to grow 10.6 per cent this year and return to pre-Covid levels of activity in 2023, Linesight believes.

The firm’s report shows that the prices of some key materials are levelling off, following surges in the first half sparked mainly by Russia’s invasion of Ukraine.

Steel prices could fall by 1 per cent in the final three months of this year, the firm says, following significant inflation in recent months.

“Growth in domestic demand from the construction industry will wane in the coming quarters, which will contribute to an easing in prices,” the report says.

Steel rebar, a key material for office and apartment building, will cost €907 a tonne in the fourth quarter, says Linesight. Flat steel will cost €1,193.

Timber prices began levelling off in the third quarter of the year as demand from builders weakened, the firm notes.

Linesight expects timber to cost €112 a sq m during the fourth quarter.

Energy costs are likely to keep cement and stone prices high in coming months. Concrete blocks and bricks have levelled off, but at an elevated level, according to the report.