Return to EU average would see 29,000 additional construction jobs

By Business & Finance
13 May 2014

29,000 additional jobs would be created in Ireland’s construction sector if the numbers employed could be brought in-line with EU levels, according to property consultants Savills Ireland.

Speaking in advance of the imminent publication of the Government’s construction strategy, Dr John McCartney, economist and director of Research at Savills, said that a return of construction employment to EU norms should be the main goal: “From a high of almost 13pc in 2006, the proportion of Ireland’s workers employed in building is now 5.4pc, which is more than one-fifth below the EU average. The 29,000 additional jobs that this shortfall represents are not only essential for Ireland’s construction sector,  but also for the economy as a whole.”

He continued: “Despite falling unemployment and the creation of 85,000 new jobs since 2012,  Ireland’s economic recovery will become increasingly difficult to sustain without an uplift in construction employment. An estimated 93,000 construction workers are currently on the live register.  This represents almost one quarter of all those signing-on and 39% of all unemployed males.  The skills profile of many of these workers remains best suited to work in the building industry.”

Savills say that a strategy focused on bringing down the cost of building would help kick-start activity in the sector which, in-turn, would create employment. Measures they would like to see introduced include:

Reducing VAT on new homes

McCartney said: “Many people are unaware that builders have to pass 13.5% of every new home sale back to the Government in VAT. If this was reduced to 9%, as has been done in the tourism and hospitality sector, many housing schemes which cannot be profitably undertaken at current construction costs would immediately become viable”.

Reducing local authority development levies

All of Dublin’s local authorities have reduced development contributions since 2013. However, the reductions have not kept pace with the 50% decline in Dublin’s house prices. Therefore, today’s developers are being forfeit a higher proportion of the sales price of each unit in the form of levies. Further reducing levies and freezing them for a set period into the future would make schemes viable and incentivise builders to break ground on new developments.

Reducing density requirements

Due to demographic factors – not least the 23% collapse in the number of 20-somethings in Dublin since 2009 – housing demand is currently focused on family homes.  However, while some local authorities have taken note of this and begun to relax their density requirements, others are still insisting on very high density apartment developments. Given the costs associated with building apartments (e.g. the cost of providing underground parking), and the fact that the strongest demand in many areas is for housing, this inflexibility is currently making development unviable in locations.