Rising energy and materials prices are driving up building costs as the Republic grapples with housing and infrastructure challenges, says a new report.Construction growth could slip to 1.7 per cent this year from 11.8 per cent in 2025, according to multinational quantity surveyors’ firm Linesight.New European Union (EU) environmental regulations and the impact of the Middle East conflict are increasing inflation “and raising project costs across the board”, says the firm’s latest Construction Market Insights report.The EU’s carbon border adjustment mechanism, meant to level the carbon costs of domestic and imported goods, along with the bloc’s emissions trading system, are adding to inflation, Linesight notes.Labour shortages in electrical and mechanical trades are intensifying, says the firm.In addition, equipment supplies are tight.Has the Irish building sector got themselves hooked on Government subsidies? Listen | 39:58Almost nine out of 10 European manufacturers say they operated at full capacity in the first three months of this year, “indicating limited availability across key equipment and materials”.The Republic’s construction market outlook remains positive, with strong demand in energy, infrastructure and businesses including data centres, high-tech industry and pharmaceuticals, according to Richard Joyce, managing director, Linesight Europe.“However, this demand is being tempered by persistent labour shortages, supply chain complexity and global instability,” he cautioned.Energy price volatility sparked by the US-Israel-Iran conflict is driving up commodity costs, the report confirms.Copper is likely to rise 32.2 per cent this year, while aluminium prices are forecast to climb 29.2 per cent, the firm says.These trends are likely to boost overall building costs by 2.5 per cent to 3.5 per cent this year.Linesight argues that this reinforces “the need for proactive cost management and procurement planning”.Large-scale State investment in transport, energy, water, housing and healthcare will ensure continued growth in construction this year, the report forecasts.In the private sector, there is sustained demand for data centres and life science manufacturing.Linesight’s figures show that the Republic had one of Europe’s most active construction industries in 2025.“However, market constraints are likely to hamper growth in the coming years,” says the firm, which published its report this week.