Ireland construction trends

The Irish construction market is forecast to decline by 4.1% in real terms during 2023, having grown by 15.3% in 2022. The decline can be attributed to high inflation, rising interest rates, and construction material cost pressures. Increases in the cost of borrowing have impacted the availability of finance as banks tighten their requirements for loan approvals, further stalling construction activity¹.

Although output has fallen recently, the future outlook for construction appears more optimistic as the wider economy slowly recovers from the cost of living crisis. The Irish construction industry is anticipating projected growth of more than 4% between 2024 and 2027, owing largely to a resurgence of investment across its energy, utilities, and transport sectors.  

The construction market in Ireland is enjoying a boom in Dublin, Cork, and Galway due to numerous residential, commercial and public sector infrastructure projects. Cork in particular has seen significant demand for housing and commercial space following a surge in population, with the region alone receiving 14% of Ireland’s planning permissions in 2022 and now employing 10% of Ireland’s construction workforce².

In 2024, construction work will commence to revitalise Cork’s docklands. The €350 million project will see the development of office, retail and residential units on a 1.5 hectare site on Kennedy Quay in the city, with the potential to create 5,000 new jobs.

Global economic factors and industry challenges will continue to influence construction costs in 2024. These challenges include rising materials and labour costs, fluctuating energy prices and interest rates, as well as international influences such as the war in Ukraine.  

In Ireland, cost and inflationary pressures continue to hamper growth and profit margins. 96% of construction firms have experienced a rise in the cost of building materials, with 86% citing this as their main area of concern ahead of access to skilled labour and the cost of labour³. A study has also revealed that construction costs for homes are up to 30% higher in Dublin compared to comparable cites in other European countries, such as Denmark, Germany, the Netherlands and the UK, due to escalating labour costs and more stringent building regulations⁴.

Costs are being influenced by high construction demand as a result of economic growth and population expansion. However, there are clear signs that construction inflation is beginning to stabilise for a range of materials. Energy prices and other manufacturing materials used for insulation and steel reinforcement are settling down, but the cost of concrete products continues to spiral.  

The Irish government's decision to introduce a 5% concrete levy from September 2023 was a further blow to construction companies who were already constrained by labour, finance and inflation challenges⁵.

The Irish construction industry relies heavily on finance to fund construction projects, which is becoming difficult to obtain following increases in interest rates by the European Central Bank.  

Research conducted by the Society of Chartered Surveyors Ireland has revealed that 44% of construction companies are struggling due to the lack of availability of finance and insufficient grant funding. In turn, this is having a negative effect on meeting targets for the National Residential Retrofit plan – an Irish government initiative to improve energy efficiency in homes by installing 400,000 heat pumps to replace older, less efficient heating systems by the end of 2030⁶.

Surveyors believe the ‘viability of projects’ stemming from a hike in interest rates is the principal reason for them struggling to raise development finance and secure bank lending and credit approval. Even when funding is made available, the process of applying for finance can take several months. In some instances, funding has been put on hold due to the volatility of cost pressures.

Approximately 37% of carbon emissions in Ireland come from construction, 23% from heat, light and cool buildings, and 14% from the production of construction materials. Ireland’s commitment to halving its greenhouse gas emissions by 2030 will, therefore, depend heavily on the construction industry placing a greater emphasis on sustainable practices⁷.

The demand for more housing in Ireland has reached a critical point. The Irish government’s Housing for All plan aims to provide 300,000 new homes by 2030, which is expected to drive growth and employment opportunities in the residential construction sector.  

Employing innovative methods of construction are key to delivering energy efficient homes to reduce carbon emissions whilst also solving Ireland’s housing crisis.

3D printing is being explored as a potentially faster, more cost-effective method for constructing homes compared to traditional methods. 2023 has seen Dublin construction firm Harcourt Technologies build Ireland’s first 3D printed house. Developers hope this significant milestone could revolutionise construction by providing a more cost effective and sustainable way to build, as well as streamlining building processes.

Sustainability represents a significant opportunity for the construction industry to invest in green technologies to meet regulatory demands and gain a competitive advantage. For example, since switching to a electric telehandler from a diesel-powered version at the Coopers Cross site in Dublin docklands, Irish contractor Sisk has saved 22 tonnes of CO2 emissions during 1,500 hours of work, and reduced noise pollution⁸.

Furthermore, the electrically powered equipment was able to outpace the work a traditional diesel version could have achieved with neither battery charge or range being an issue.