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Construction Sector Sees Contraction Despite Housing Growth

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Construction Sector Sees Contraction Despite Housing Growth

Construction Sector Sees Contraction Despite Housing Growth
February 12
12:02 2024

The latest findings from the BNP Paribas Real Estate Ireland Construction Index reveal that while new home building continues to thrive, the overall construction industry faces another month of contraction.

In January, the Construction Index registered its seventh consecutive monthly decline, albeit at a slower rate compared to previous months. The index rose marginally to 45.9 from December’s 45.1, indicating a softening in the pace of contraction. Notably, residential construction activity saw the least decline since September, while commercial projects also experienced a slowdown.

Despite these challenges, there is optimism for growth in the sector this year. The survey predicts improvements in new business and workloads, supporting a positive outlook for construction activity over the next 12 months. Encouragingly, construction firms have begun hiring additional staff, marking the fastest pace of employment growth in almost a year.

However, input costs remain a concern, with inflation persisting, albeit at a slower rate. Rising shipping costs and general inflationary pressures contribute to these ongoing challenges.

John McCartney, Director and Head of Research at BNP Paribas Real Estate Ireland, noted the resilience of the residential sector, attributing its outperformance to government subsidies and rising property prices. With the expiration of temporary development contributions waivers in April, the sector’s momentum may face new tests in the coming months.

The Construction Index draws from a survey of 150 construction companies, providing a comprehensive snapshot of industry trends.

Separate analysis by Aecom underscores the challenges facing the commercial property market, with office vacancy rates rising amid shifting work patterns. However, the residential sector remains a bright spot, with house completions expected to reach their highest levels in over 15 years, driven by increased building activity despite borrowing cost concerns.

GeoDirectory data further highlights the uptick in residential construction, with an increase in buildings under construction aimed at meeting growing housing demand amidst a shortage.

As the construction sector navigates through various challenges, including rising costs and evolving market dynamics, the focus remains on sustaining growth and meeting the housing needs of the population.

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