Housing starts fall again in October as rising costs sap investment

The output of new homes may stall “well short” of the Government’s target of 33,000 new units to be added to the national housing stock as rising construction costs and interest rates continue to dampen investment, Goodbody Stockbrokers has warned.

In its latest housing commencement tracker, the brokerage highlighted another drop-off in new home starts in October when construction commenced on some 1,841 new units nationally. This represents a 31 per cent decline year-on-year, Goodbody said, with apartment commencements down 29 per cent and housing scheme starts down 23 per cent in the three months to the end of October compared to the same period last year.

It follows a 31 per cent year-on-year drop-off in September, when 2,211 housing units were commenced.

It means the annual total for housing commencements to October is 26,608, down from a peak of 35,000 earlier in the year.

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The report indicates that the declines in housing and apartment commencements are happening for somewhat different reasons.

“Viability of apartment construction has been compromised by increased construction costs and yields recently,” it said. “Viability may also be an issue in terms of housing construction, but other factors, such as land availability, is also playing a role.”

Against this backdrop, Goodbody said the trend, which has accelerated in recent months, suggests that housing output “may stall in the mid twenty thousands over the next 18 months”.

“This is well short of the Government’s ‘Housing for All’ target of 33,000 units and even further below estimated need over the medium-term,” it said.

Last week, The Irish Times reported that the Government’s capital expenditure programme on housing is likely to significantly undershoot its target this year, according to data obtained from the Department of Housing.

Under its Housing for All strategy, launched last year, the Government pledged to spend €20 billion on social and affordable housing over the next five years, including €4 billion in both 2022 and 2023.

However, figures provided by Minister for Housing Darragh O’Brien, in response to a parliamentary question from Sinn Féin’s Eoin Ó Broin, point to a capital spend of just €1.2 billion for the nine months to the end of September. This includes €568 million on direct delivery programmes by local authorities and approved housing bodies.

Mr O’Brien said recently it would be “challenging” to hit the Government’s target of delivering 4,100 affordable and cost-rental homes by the end of the year.

While noting that several hurdles were frustrating the target being reached, he said he was confident that the target for 2022 of 24,600 homes of all kinds, including private and social housing, would be reached.

In his speech to the Fine Gael Ardfheis over the weekend, Tánaiste Leo Varadkar said the Government needs to do a lot more on housing issues, adding that increasing rates of home ownership will be a priority for the next two years.

Mr Varadkar, who is to replace Micheál Martin as Taoiseach in December, said: “I know we need to do much more on housing” and said the Government’s Housing for All plan needs to be implemented and accelerated.