Irish housing output prospects brighten but growth could yet stall, warns BNP Paribas

The Government should not bet that the growth in housing output will persist, a survey suggests 

Activity in residential housing continues to draw much attention because the housing crisis is likely to be the top issue in the forthcoming general election campaign.

All three parts of the Irish construction industry contracted again in February, including housing where output, although improving, could still stall later this year, according to the leading monthly building survey. 

The BNP Paribas Real Estate survey, which canvasses the views of 150 building firms across housing, commercial construction such as office developments, as well as civil engineering, nonetheless found that the prospects for future growth had brightened on the prospects that the European Central Bank is preparing to cut official interest rates.  

However, it was activity in residential housing that continues to draw much attention because the housing crisis is likely to be the top issue in the forthcoming general election campaign. 

BNP Paribas suggests that the Government should not bet that the growth in housing output of recent times will persist this year or beyond. 

Paradox

The apparent paradox of the survey showing that housing activity again contracted in February, for the 17th month in a row, could be explained by the fact that there were fewer development sites that had been given approval, the property firm said. 

"This appears to jar with the strong upward trend in both housing commencements and completions," said John McCartney, director and head of research at BNP Paribas Real Estate. 

"Firstly, the acceleration in completions has outstripped the acceleration in commencements; nearly 3,600 more units have been finished than started over the last 18 months, and this has naturally dragged on onsite activity. Secondly, probably due to continued uncertainty about the economy and construction costs, there has been a slowdown in home improvement activity," Mr McCartney said in a commentary.

He warned that the "rapid growth" in completed housing units "could stall a bit in 2024" but that "the continued upward trend in starts bodes well for residential supply over the medium term". 

Across the industry, employment levels rose as the outlook brightened, helped by the prospects of ECB rate cuts. However, there were signs that input prices had quickened again, the survey found.