JUST WHEN the construction industry thought the news couldn't get any worse, it suddenly did. Several reports published this week have painted a bleak picture for an industry already on its knees after the property sector meltdown, writes CONOR POPE
They indicate that prices for big and small construction jobs have fallen almost as dramatically as jobless numbers in the sector have risen.
Although homeowners will have sympathy for individual tradesmen who have lost their jobs, they will relish the consequential price drops and the sudden availability of tilers, plumbers and carpenters who could not be got for love nor ridiculous sums of money at the height of the boom.
“Builders were making money hand over fist for years and even at a 30 per cent discount they are still making money and don’t let anyone tell you any different,” one industry source unsympathetic to the plight of builders told The Irish Times this week.
The Construction Industry Federation stoutly rejected the comments and claimed it was ignorant of the realities faced by Irish builders.
It will, however, find a more sympathetic ear amongst consumers sick of being ripped off and delighted to see the price of a single concrete block being laid – to pick just a single example – fall from €2 at the height of the boom to a somewhat more realistic 50 cent per block today.
Tender prices for the construction industry have fallen to levels not seen since 1999, according to figures published this week by the Society of Chartered Surveyors (SCS).
It says the rate of deflation is accelerating, with prices down 10.5 per cent in the first six months of 2009 and 17.3 per cent since last September.
Contractors and sub-contractors are now bidding well below cost just to secure work and keep cash flowing, a practice which is unsustainable according to Ken Cribbins, SCS president. On Monday he warned that if activity failed to pick up, more firms would go out of business.
His fears were borne out almost immediately by figures from the Central Statistics Office showing that 86,800 construction workers had lost their jobs in the last 12 months.
With stagnation in the market and the banks’ extreme reluctance to issue mortgages, anecdotal evidence from architects, quantity surveyors, builders and estate agents suggests people are deciding to take advantage of cheaper construction costs to embark on small scale renovation projects instead of moving house.
According to the recently published Onlinetradesmen.com price index, compiled from data obtained from over 200,000 home improvement projects submitted via the online service since 2005, the average spend per home improvement project this year is €5,659, down from a high of €14,044 in 2007.
The reduction has been driven largely by a drop in tradesmen’s prices as well as a trend towards smaller home improvement projects.
The index shows the average building cost is now €82.50 per sq ft down from €171 per sq ft in 2007. Plumbers have reduced their costs, with the nationwide average hourly callout rate now just under €60, down from a high of €109 in 2007. Electricians have also reduced their costs significantly.
While the headline figures are stark and consumer friendly, they may not tally with the experience of many homeowners getting quotes for small scale projects.
According to surveyor John Nolan of Austin Reddy Co, the biggest price falls have been on the large volume work “but when you get back to the smaller, domestic jobs, the room for builders to manoeuvre on price is much more limited”.
One factor keeping the domestic renovation sector more buoyant than it otherwise might be is its reliance on word of mouth.
“If you are going to go with a builder based on the recommendations of others, then it inevitably limits the size of the pool and takes the competitive edge away,” Nolan says.
“Most people are prepared to pay a premium for peace of mind when it comes to their own homes.”
Nolan says that while tender prices for large scale projects has fallen by over 30 per cent, the domestic market has fallen by closer to between 10 and 15 per cent.
“If you tender you will get much lower prices than you anticipated but I can guarantee you that the price at the start will not be the same as the price at the finish.” He also warns people to be “wary of a builder cutting costs to such an extent that they don’t have the capacity to finish a job”.
