Professional services company AECOM has forecast 5% growth in construction output volume in 2025 in its annual review, but it warned that record levels of state investment need to be matched by similar growth levels from the private sector to meet the huge demand for homes in Ireland.

There were 54,574 housing starts in the first 11 months of 2024, but continuing viability challenges and a lack of supporting water, energy and transport infrastructure are the biggest challenges facing the market. That could hinder the conversion of existing residential planning permissions into completed developments, the company said.

“Despite ambition and available capital to deliver national infrastructure projects, the availability of a skilled workforce will continue to be a challenge for the Irish economy in 2025,” AECOM said. “This includes a less-reported undersupply of contractor management and supervision resources, and staff in professional services firms.”

It said that inflation remains a feature of the market, but tender price inflation is expected to continue to cool in 2025 to around 3%.

While Ireland’s economy is strong, addressing the construction industry productivity gap of 30% compared to other European countries is also essential for long-term competitiveness, AECOM said.

It pointed to the adoption of “programmatic thinking” to overcome a range of delaying factors, including extended planning and mobilisation periods, which have caused construction projects in Ireland to take longer to complete.

New approaches are already in evidence on projects by Iarnród Éireann, the Health Service Executive, the Land Development Agency and Uisce Éireann as providing an approach to drive greater efficiency and accelerate delivery of major state infrastructure projects, the company added.

“Ireland's strong economic performance and record government investment in housing and infrastructure reflect a nation building for the future,” AECOM Director and Country Leader for Ireland John O’Regan said in a statement. “However, delivering on these ambitions requires a coordinated, programmatic approach to ensure that housing, transport, water, and energy systems develop in tandem.

“With the construction sector at the forefront of this transformation, we have a unique opportunity to address critical challenges, drive sustainable growth, and enhance Ireland's competitiveness on the global stage.”