Construction output is forecast at almost €20bn this year Irish 2009 builder output forecast at €19.9bn The main areas expected to generate an increase in construction output volumes this year are airports, water services, energy, education and sports facilities, according to a report issued this week. There is also a “substantial increase” planned in the level of expenditure on the repair, maintenance and improvement of primary schools. This is according to the DKM Economic Consultants Review of the Construction Industry 2008 and Outlook 2009–2011. Carried out annually, the report is commissioned on behalf of the Department of the Environment, Heritage and Local Government. Overall, however, Ireland’s construction output is forecast to decline by 38% to €19.9bn this year. By the end of 2011 construction output volumes will return to mid-1990s levels, when Ireland’s decade-long housing boom started, the report said. Output is forecast to decline by 24% next year and 8% cent in 2011. Therefore, over the period 2008-2011 construction output volumes are forecast to decline by 52.5%, an average of 22% per year. Housing Supply The report says that a housing supply overhang in the residential market will discourage new building activity for next four years with only 10,000 completions per annum forecast in 2010 and 2011. Meanwhile, the number of new dwellings being built is forecast at 17,000 this year. “The most pressing problem in the residential market is the surplus housing inventory,” DKM Economic Consultants said. The “oversupply” of homes “over and above what is considered as the normal level of vacant units is estimated at 136,000 units on average, which is equivalent to around four years of current housing demand”.

Prospects A breakdown of the forecast shows that the overall investment in productive infrastructure projects is expected to record a very modest increase of 1.3% - although the performance of the individual areas will be mixed. Investment in airports/seaports will increase by 52.1%, while water services is also projected to increase by 13.5%. However, the volume of construction output associated with investment in telecommunications is expected to fall by 15.3%. Public transport projects will fall by 13.3%, while roads is expected to decline by 4.7%. Meanwhile, the volume of construction related investment in social infrastructure projects is also expected to increase again this year. According to the report, this year’s increase of 4% reflects significant investment in educational buildings, which is up by 25.4%. However, a drop in investment of 15.1% in public buildings and 9.5% in hospitals will result in a lower construction output in these areas. Public sector construction Meanwhile, the report also suggests that the public sector will be the only positive contributor to construction activity this year. Overall public sector construction activity is forecast to rise by 1.8% in volume terms in 2009, while the value of public funded investment in construction projects is estimated at €10.1bn this year. However, it also points out that public sector construction is suffering from the deterioration in the public finances with €9.3bn already taken out of the multi-annual capital investment provisions for the period 2009 – 2011 compared with the 2008 public capital programme (PCP). “There is significant risk that further reductions in the PCP may be inevitable – a development which would have disastrous consequences for construction projects,” DKM Economic Consultants said. However, the report then pointed out that signals so far from the Government suggest, notwithstanding the public finances, that the focus continues to be on supporting labour intensive areas of activity, such as construction.

Irish Construction Industry Outlook

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