According to the 2007 Summer Review of the Construction Industry, published by Davis Langdon PKS, one of Ireland’s leading construction cost management firms, there will be 75,000 to 80,000 new house completions during 2007, down from the 93,000 peak in 2006.

This will be the first fall in new housing output since the current growth pattern commenced in 1989.

Norman Craig, Managing Director of DLPKS, explained that, compared with the 18,000 units completed in 1989, a total of 75,000 still represents a very significant investment in this area. He went on to stress that although the market is settling back somewhat, the underlying demand for new housing will support a continuation of significant activity in this area.

He stated: "In 2006, housing constituted 68% of new construction so any reduction will have an immediate impact on the total volume of construction. General construction in public buildings, schools, hospitals, offices and retail will continue to grow in 2007 at an expected rate of 3%. Civil engineering, supported by the major investment in roads under the National Development Plan, will also grow strongly at 6%.

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"However, the growth in general construction and civil engineering will not be enough to compensate for the reduction in new housing, so we expect a 5% reduction in the volume of new construction in 2007."

Mr Craig said that the Davis Langdon PKS Summer Review finds that construction prices continue to be competitive with tender levels in the first half of 2007 being slightly below the Consumer Price Index and the Construction Price Index.

“The Society of Chartered Surveyors Construction Cost Index recorded a 4% increase between April 2006 and April 2007 while construction materials increased by 7%. Tender levels, which reflect the prices quoted by builders for new projects rose by less than 4% in the same period, with prices for larger projects were more competitive than those for small projects.”

However, he warned that the new public works contracts published by the Department of Finance may slow down the flow of new public sector projects over the coming year.

“It may also lead to higher tender figures in the short term as contractors and subcontractors familiarise themselves with the new regime. Indeed, it is possible that a two tier market will emerge with keener pricing for private sector projects, where the client continues to accept the risks which in the public sector are now transferred to the contractor,” Mr Craig concluded.

(CL)