Building output up by 80% since 2000

CONSTRUCTION industry output has risen by over 80% since 2000, to a value of €32 billion at the end of 2005, compared to just €17.6bn in 2000.

This massive boost to the sector is confirmed in a major report, Construction and Housing in Ireland, published yesterday by the Central Statistics Office (CSO).

It shows Ireland has the highest construction output per head in Europe at about €7,600 — more than double the British figure.

About one-in-eight employed people works in construction, equal to 12.6% of the workforce and well above the EU average of less than 8%.

The report estimates that more than 25,000 non-nationals were employed in construction by the fourth quarter of 2005, which is about 10% of the industry.

More than 86,000 houses and apartments were built last year, 36% more than in 2000. Recent forecasts suggest the figure could be as high as 100,000 in the current year.

After the spate of house building, the country now has 1.8 million homes, but 275,000 of them are lying vacant, suggesting a huge increase in second or holiday homes in recent years.

House completions were at a rate of 21 units per 1,000 of population, the highest rate of residential building in the EU.

Dr Dan McLaughlin, chief economist at Bank of Ireland Global Markets, said the housing market was booming due to basic demand. Prices should start to slow next, due to rising interest rates and because supply is starting to catch up with demand.

The report shows that residential building accounted for two-thirds of total output in 2005.

As the housing market boomed, so did the rate of mortgage exposure, which has increased from €33bn in 2000 to almost €100bn last year. The average mortgage cost €102,000 in 2000 and €200,000 last year.

In 2000, the CSO noted that less than 5% of new mortgages were for over €200,000, but by 2005 almost 50% of mortgages exceeded that level.

The average price of a new house has gone from €166,000 in 2000 to just over €272,000 in 2005, while the price of a new apartment rose from €206,000 in 2000 to over €293,000 last year.

While the pace of output has risen dramatically, Dr McLaughlin said the reality is that housing output has not risen that sharply when taken in the overall economic context.

“If you go back to 1970, housing output accounted for 9% of GDP compared with 10.75% today,” he said.

“The country has gone through a very significant construction boom. But it has happened because the set of circumstances demanded a massive rise in housing stock.”

It did not happen, says Dr McLoughlin, because the Government and the social partners decided we needed to boost housing.

“It happened because people needed homes and apartments to live in.”

He said the rate of house price increases will slow considerably next year.