June’s 61% drop in new homes built

UNCERTAINTY over the state of the property market intensified yesterday as falling demand for homes led to a record 61% slump in the number of new houses being built.

As a row continued between those within the property sector and some more pessimistic forecasters, Davy Stockbrokers reported a record 61% fall in housing starts in June compared with the same month last year.

While a slowdown in housing supply has previously led to higher prices in a demand-led market, this time the building drop is being blamed on a fall in demand, fed by uncertainty along with eight interest rate hikes since late 2005.

Builders began work on 3,092 new homes last month, down from 7,863 in June of 2006, Davy economist Rossa White said yesterday, referring to combined data from Homebond and Premier Guarantees, which registers new developments.

Irish house prices, which have quadrupled in the past decade, fell in May for a third consecutive month, while planning approvals were down by 8.8% in the first quarter of this year.

“This is showing that the slowdown is intensifying,” said Mr White. “Builders are cutting back drastically.”

AIB’s global treasury economic research team also noted a sharp fall in housing registrations last month, and said that the “correction” in the market is continuing.

Meanwhile, the war of words over the future of the property market deepened yesterday as one of the country’s top auctioneers slammed the “doom and gloom merchants” who are predicting a property price crash in Ireland.

Irish Auctioneers and Valuers Institute president Robert Ganly, of Knight Frank Ganly Walters, maintained that now is a good time to buy into the housing market.

He rubbished UCD Professor Morgan Kelly’s theory regarding a possible 40% to 60% drop in prices over the coming years.

“I would challenge him,” said Mr Ganly, “to sell his house now if he thinks that, and I’m sure one of our members will sell it for him. He should put the money in the bank and wait eight years and buy it back again for 45% cheaper.”

The IAVI leader said he was “sick and tired” of economists such as Professor Kelly making pessimistic predictions about the Irish market.

He also dismissed reports of 30% cuts in property prices over the past year in some areas. Website irishpropertywatch.com has reported price drops in 865 different cases this year, with a 0.5 acre site in Co Kildare dropping in value from €275,000 to €120,000, a fall of 56%.

“I don’t accept a 30% drop. I think what has happened is that people overpriced the house to start with,” said Mr Ganly, referring to rises of 25% in house prices in some parts of the country in 2006.