The substantial increases in the value of construction output have largely reflected high levels of economic growth in the Irish Republic, with several key drivers including EU supported infrastructure projects, increases in new house-building, high levels of RMI and investment in civil engineering projects. In addition, in January 2007 the second National Development Plan was launched, with an estimated 184 billion to be invested for the period 2007-2013 and is expected to support public sector construction activity for the next 7 years.
Recent years have seen big increases in construction costs with building materials prices rising at a faster rate than labour costs. Much of this increase is due to a rise in raw materials costs, while energy prices are also increasing rapidly in 2007. As a result, the forecast for building materials inflation for the full year is 6%
2007 has seen the Irish construction market enter a new phase in its development and it is now widely believed that the 'boom time' for the sector is now at an end and will be followed by a more sedate and sustained period of growth over the coming years. Rising consumer incomes and investment remain the drivers of growth, with funds from maturing SSIA accounts and the election in 2008 expected to underpin construction activity in the short term, while strong growth in employment and consumption will boost the demand for non-residential buildings.
Perhaps most significantly, the key sector which has underpinned growth in the construction market in recent years - residential house building - has now peaked at around 93,000 completions in 2006. Volumes have been falling rapidly in late 2007, with forecasts for 2008 varying, but all indicating a reasonably substantial decline, at least in the short term.
Distribution of building and home improvement products in Ireland is dominated by the Grafton Group, following its acquisition of Heiton, with a strong position in both the builders merchants and DIY sectors. Other leading operators with expanding operations include Wolseley and B&Q, while Travis Perkins and Homebase are now also expanding their Irish DIY operations, which should result in a very competitive market over the next 5 years.
A