40% of 2004 new houses vacant

MORE than 30,000 of the 77,000 new houses built in 2004 are vacant, according to a stockbroker.

This is close to 40% of the houses built last year and it suggests a sharp reduction in building levels is on the cards in the years ahead.

Davy Stockbrokers said vacancy levels had risen sharply by international standards in the past few years.

That trend suggests a cutback in the numbers of houses to be built, but not this year, said Davys senior economist Rossa White. While concerns justifiably exist about oversupply on the basis of output levels, the risk of a house-price bubble remained low, he said.

To hit bubble territory, we would need to see a big change in sentiment, where buyers took the view that capital returns no longer justified the asking prices, he said.

Davys said the pace of growth in consumer spending has accelerated due to rising real incomes, which will push consumer demand to grow by 5.5% in 2005 and 5.0% in 2006.

“We expect growth of 5.5% in 2007, the year of the SSIAs,” said Davys. A change in statistical methodology is likely to increase estimates of previous years’ economic growth rates but could reduce this year’s figure by about 0.5% and by close on 1% in 2006 and 2007.

This is due to a change in the way the impact of the housing market on the economy is calculated by the Central Statistics Office, said Davys.

Nevertheless, GNP growth is forecast at 5% in the current year and close on 4% in both 2006 and 2007, still well above the European average, said Davys.

The figures are more modest than forecasts from NCB Stockbrokers and Bank of Ireland, who are predicting growth of 6% in the years ahead. On the housing front Davys still expect activity to stay robust with close on 77,000 new units to be built again in 2005.

Davys said it expects “completions to fall significantly in the coming years” with the number of houses built falling to 65,000 by 2007. Next year the figure will come in at 72,000, said the brokers.

Since the end of 2004 prices outside Dublin have more or less stabilised at last year’s levels, while in the Dublin area, the annual growth rate has been a very modest 3% rise in each of the past six months, he said.

“Suffice to say at this stage that our calculations show that the demand for new permanent residences in recent years has been no more than 45,000 per annum.”

That raises serious questions about where the market is headed and its long-term future in terms of employment and its contribution to the economy.