Housing starts continue to rise despite hike in construction costs

Housing commencements, one of the strongest indicators of future housing supply, continue to rise despite the impact of rising construction costs.

Commencement notices for the construction of 9,928 new homes were received by the Building Control Management System (BCMS) between January and April this year.

The Department of Housing noted that this was the highest level of commencements for the four-year period since records began in 2015 and some 6 per cent higher than the same period last year (9,343).

More than 56,000 homes were either commenced or completed, it said, while noting the number of completions in 2022 (29,851) was greater than the total for any full year since the Central Statistics Office completions series began.

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A commencement notice is a notification to a building control authority (BCA) that a party intends to carry out the construction of new home or a material change of use to which the building regulations apply. The notice must be given to the authority not more than 28 days and not less than 14 days before the commencement of works.

“These figures show that the temporary dip in commencements between April and October last year is well behind us,” John McCartney, director and head of research with BNP Paribas Real Estate, said.

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There has been a steady recovery since last November with 14,125 units started – a 7.1 per cent increase year-on-year, he said.

“Together with latest construction PMI [purchasing managers index] data which show building firms have increased order books, are taking on more staff, are buying more materials and are expecting to be busier in 12 months’ time, this suggests concerns about a sharp pullback in housing output this year may be misplaced,” Mr McCartney said.

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There had been concern that the sudden uptick in construction costs could jeopardise the Government’s housing targets. The Coalition’s Housing for All plan promises up to 33,000 units a year out to 2030.

The latest Residential Property Price Index shows house price inflation continues to slow in the face of higher interest rates and broader cost of living pressures.

The index showed prices nationally increased by 3.9 per cent in the 12 months to March this year, down from an annual rate of 5.1 per cent in February.