Housing slowdown fear despite upbeat CSO data

Housing slowdown fear despite upbeat CSO data
File photo

A slowdown in new house building output is likely without a relaxation of the Central Bank's mortgage rules and a government commitment to a continuation of the Help-to-Buy scheme, one Cork-based developer has warned.

This is despite industry figures, this week, showing a widespread increase in construction activity.

"We will begin to see a slowdown in output as the new homes market appears to be reaching equilibrium, with developers supplying as many homes as they can currently sell," said Eamon Heatherington, a director at Cork-based company GPD Property Developers.

The key issue is that many people who have demonstrated their consistent ability to pay €1,500+ in rent over the last couple of years, are prevented from qualifying for a monthly mortgage of less than this on a comparable property.

"Recent figures from Daft revealed that in Dublin the average rent is 37% higher than the average mortgage repayment and the average rent in Cork is now 47% higher. The economics of this simply don’t add up. A loosening of the Central Bank mortgage rules would definitely help matters, as would confirmation on the extension of the Help-to-Buy Scheme," he said.

He was speaking on the back of new CSO figures showing a near 3% increase in overall construction activity in the second quarter of the year - albeit led by civil engineering work, but also featuring an 8.3% quarter-by-quarter rise in residential building work.

The CSO said its construction and building production index rose above the 200 point mark for the first time since 2008, although it remains well shy of the 854.4 peak seen in the first quarter of 2006.

"There have been many complaints that developers are building to rent rather than to sell, but with so few individuals or couples qualifying for a mortgage under the current rules, these developers would appear to have little choice," Mr Heatherington said.

Latest monthly construction sector data from Ulster Bank, meanwhile, earlier this week showed that building activity growth picked-up for the first time in four months in August. However, new order growth slowed to a four and a half year low during the month and confidence amongst construction firms has slumped to a nine year low.

"The slippage in sentiment largely reflected worries about Brexit impacts, with some firms reporting that Brexit uncertainty is impacting work pipelines due to delayed decision-making among clients," said Ulster Bank chief economist Simon Barry.

Of further note, international credit ratings agency Moody's has downgraded its growth expectations for the building materials market - albeit to a 'stable' outlook from a 'positive' one. This, it said, is based on weakening macro conditions and high performance benchmarks.

"The key drivers of the stable outlook are a combination of weakening macroeconomic conditions - particularly in key European and US markets - and the increasing likelihood that the sector will be unable to outperform strong first half 2019 results as the economy slows," Moody's said.

"Weakening sentiment is already hitting other sectors, like automotive, steel, metals and mining, and chemicals, and it's only a matter of time before the building materials industry feels the impact if indicators don't recover swiftly," said Stanislas Duquesnoy, a Moody's senior vice president.

More on this topic

More community development needed to solve problem of vacant homes, group claimsMore community development needed to solve problem of vacant homes, group claims

Housing Minister defends new 'affordable' housing developmentsHousing Minister defends new 'affordable' housing developments

1,000 new social homes delivered in first six months of 20191,000 new social homes delivered in first six months of 2019

Housing Minister to investigate scale of 'sex for rent' incidents taking placeHousing Minister to investigate scale of 'sex for rent' incidents taking place

More in this Section

Facebook suspends ‘tens of thousands’ of appsFacebook suspends ‘tens of thousands’ of apps

Walmart to stop selling e-cigarettes at its US storesWalmart to stop selling e-cigarettes at its US stores

Applegreen to retain non-core UK hotels businessApplegreen to retain non-core UK hotels business

Mainstay Medical eyeing late 2020 US commercialisation approvalMainstay Medical eyeing late 2020 US commercialisation approval


Lifestyle

Gráinne Healy only started running regularly a few years ago. She’s already completed 50 parkruns. She tells Rowena Walsh what motivates her.Ageing with Attitude: Parkruns and quiet Friday nights

Against popular wisdom and flying a plane made from bamboo, wire and bike handlebars, a Co Antrim woman blazed a sky trail for aviation and for the independence of women, writes Bette BrowneMagnificent Lilian Bland blazed a trail for independence of women in her plane of bamboo

The epic battle for the bridge at Arnhem, as depicted in the blockbuster 'A Bridge Too Far', saw the Allies aim to end the war by Christmas 1944, but failed as a huge airborne assault force failed to take the last bridge across the Rhine. In an extract from his latest book 'A Bloody Week', Dan Harvey tells the story of one of the hundreds of brave men from Ireland who gave their all to the Allied campaignThe bridge to war: Dan Harvey's new book looks at the Irish who went a bridge too far

Several days ago, the long-awaited sequel to Margaret Atwood’s The Handmaid’s Tale was released.Lindsay Woods: I have always consumed books at a furious pace

More From The Irish Examiner