Housing construction set to hit highest level since before financial crisis – The Irish Times

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About 28,000 new homes are expected to be built in the republic this year despite the dampening effects of inflation and an increasingly uncertain macroeconomic outlook, according to a new report.

It would be the highest level of housing production seen in Ireland since before the financial crash and more than a third more than last year’s total of 20,433 units.

The latest construction PMI from BNP Paribas Real Estate Ireland, however, warned that the positive trend in housing production should continue to cover “the sharp re-acceleration in population growth”.

The bank’s latest barometer indicated that activity in Ireland’s housing sector declined for a third consecutive month in August as new orders fell sharply and inflationary pressures remained pronounced.

However, the decline in overall activity “was less marked than in July”, the total activity index corrected for seasonal variations falling to 46.9 against 41.8 the previous month. A reading below 50 signals a contraction in activity.

The companies said the third consecutive reduction in total activity generally reflected the impact of sharp price increases.

The rate of input cost inflation remained elevated and well above the series average, despite slowing for the fourth consecutive month, with nearly half of all respondents indicating that their input prices had risen in course of the month.

As well as impacting construction activity, inflationary pressures have also affected companies’ ability to secure new orders, BNP Paribas said, noting that a number of companies have reported that demand for information had declined, “resulting in a further sharp contraction in new business”.

A combination of higher input costs and weaker demand also prompted builders to reduce purchasing activity. On the positive side, employment has returned to growth, with companies reporting a slight increase in their workforce.

“Two factors have defined the trajectory of construction activity over the past year. Activity picked up strongly last summer as Covid restrictions were lifted and stalled projects were given the green light to resume,” said John McCartney, Director and Head of Research at BNP Paribas Real Estate Ireland .

“However, soaring construction inflation and rising macroeconomic uncertainty have since started to pull in the other direction. August PMI data indicates a continuation of this more recent trend,” a- he declared.

“Order books are down for the fifth consecutive month, industry expectations remain tilted towards contraction and material purchases are down sharply,” he said.

“We believe that 28,000 new homes can be delivered this year. However, given the sharp re-acceleration in population growth, the positive trend in housing production must continue,” McCartney said.

A separate report from IPAV, the Institute of Professional Auctioneers and Appraisers, indicated a change in sentiment in the housing market.

While price growth has remained strong in the first four months of 2022, there has been a noticeable shift in the level of increases seen in May and June. “In the first four months, the overall increase would have been around 10%, but changes in May and June brought the six-month figure to 6.36%,” chief executive Pat said. Davidt.

“Over the past two months, the practice of increasing reserves – where neighborhood sellers’ price expectations tend to rise when a property hits a particular level – had all but died out,” Mr Davitt said.

In a pre-budget submission, the Society of Chartered Surveyors Ireland (SCSI) said it needed 64,000 new homes built by 2026, reducing to around 45,000 housing units by 2030, to meet the government’s targets for accommodation for all.

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