House building expected to slow

HOUSE BUILDING activity has reached a peak and will slow down over the next two years, according to a new report from Davy Stockbrokers.

The broker said 2005 would mark a watershed in residential construction and would be the first year since 1992 when the number of new houses built would be lower than in the previous year.

“After an unprecedented period of growth, signs are that this year, there will be no year-on-year increase in the number of units built for the first time since 1992,” it said.

Davy analysts Joe Burnell and Florence O’Donoghue predicted just under 77,000 new units would be added to the country’s housing stock this year, which would be marginally below last year’s level. But next year would see this number fall to 72,000.The forecasts were based on local authority data on new builds and house registrations.

Davy said house completions in the first seven months of the year were 1% lower than in 2004 but that Ireland remained at the top of the table for house building. New houses were now being added at a rate of 19 per year for every 1,000 people, which was up from 7.5 just 10 years ago.

Demand would remain strong, however, on the back of demographics and the arrival of more immigrants to fill gaps in the labour market. Davy said there was a natural demand for around 35,000 units from those setting up new homes, while a further 10,000 new homes would be needed for immigrants from the EU accession states.

Demand for second homes and holiday residences would fuel demand for about 15,000 more units thanks to continued low interest rates and higher disposable incomes, Davy said, while another 10,000 units were likely to be built to replace existing houses that were nearing the end of their useful lives.

The broker said the fall-off in activity would affect tax-driven schemes and holiday homes rather than traditional residential demand.

Most Irish construction companies would cope with any slowdown, while there would be benefits for some from a loosening of the labour market that would ease pressure on wages.