House building activity grows sharply

House building activity posted a further significant increase amid a recruitment boom across the industry, a monthly survey has shown, which will lift hopes that builders are finally responding to the huge shortages of new homes.

House building activity grows sharply

The Ulster bank construction purchasing managers’ index (PMI) showed activity in house building climbed to 63.3 in February from 59.1 in January, where any reading over 50 represents an expansion in activity.

The housing activity reading was much higher than the other two major sub-components of the survey, commercial activity and civil engineering.

At 58.9, commercial activity was also up strongly in the month, while civil engineering activity, although increasing to 48.9, showed that this part of the construction industry continued to contract.

The Ulster Bank purchasing managers’ index for the industry overall showed a reading of 57.9, up from 55.7 in the previous month.

Housing activity is closely watched for any signs that the building industry is responding to a boost in incentives for home buyers introduced in recent months.

Finance Minister Michael Noonan announced tax incentives for first-time buyers in his budget last October, while after a long review, the Central Bank loosened its mortgage lending controls.

Both measures were welcomed by the construction industry, which has complained about tight margins and high risks, as helping to spur demand for new homes. However, some analysts have said the incentives will only push up house prices.

“There was a very encouraging acceleration in residential activity which took the housing PMI back to levels last seen in November, in the process keeping housing as the strongest performing activity category last month,” said Simon Barry, the bank’s chief economist for the Republic.

“The pace of growth in commercial activity also accelerated in February and remains sharp. Civil engineering continues to lag behind the other sectors, with respondents reporting a fourth consecutive monthly decline in activity,” he said.

Mr Barry said the survey showed that hiring last month was the third-fastest rate in the survey’s history of over 16 years.

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