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Cairn chief says new homes not behind ‘pretty scary’ house price rise

Volume focused developer posts 191% surge in profits to €7.7m

Michael Stanley, Cairn CEO. Photograph: Cyril Byrne

Cairn Homes chief executive Michael Stanley has insisted new home prices are not driving “pretty scary” Irish residential property value growth, as recovering builders are more interested in selling at pace to gather equity and scale up their businesses.

Speaking after Cairn reported a 191 per cent first-half surge in gross profit to €7.7 million on the same period last year, Mr Stanley said its research shows new home prices have increased less than 3 per cent since new measures were introduced in January to help first-time buyers. Residential property inflation was running at an annual rate of almost 12 per cent in July, according to the Central Statistics Office.

“Housebuilders sensibly have to try and scale their businesses again, so they are more interested in velocity and output than they are in price. That’s the only way they’re going to grow their equity,” Mr Stanley told reporters, noting that banks have scaled back property lending significantly since the crisis.

“Are we better off selling 180 homes in Parkside (a north County Dublin development) this year at an average of €320,000 or 100 homes at €380,000? I’ll take 180 homes every day of the week. We’re a scaling business. We are very volume focused.”

The company has raised more than €720 million in a little over two years, including its initial public offering (IPO) and tapping shareholders to fund major asset purchases, from an Ulster Bank portfolio of residential development loans in 2016 to a prime 8.64 acre site on broadcaster RTÉ’s Donnybrook campus in Dublin. Cairn plans to build 500 apartments and 10 houses on the site, purchased in July for €107.5 million, 43 per cent above the guide price.

Measures brought in this year to help the market “should be given a chance”, Mr Stanley said. These include the Government’s help-to-buy incentive for first-time buyers of new homes and an easing of Central Bank lending restrictions for buyers starting off on the property ladder.

Minister for Housing Eoghan Murphy is overseeing a review of the help-to-buy scheme amid concern it has added to house price inflation.

Mr Stanley previously told The Irish Times in an interview, published last month, that such uncertainty has a knock-on impact on builders’ development plans and their willingness to finance projects.

Rent levels

He said on Tuesday the measures are “allowing more young people to get on the property ladder to escape the challenge of trying to rent a home in Dublin today”. While the average cost of renting in Dublin was 11 per cent cheaper than a typical mortgage in 2014, tenants are currently paying 32.5 per cent more as rents have surpassed their 2008 peak, according to Cairn.

Still, although site commencement notices have increased “significantly” this year, the Cairn chief executive conceded that the industry’s level of construction in recent times is “disappointing” and that more needs to be done.

Cairn’s revenues for the first six months of the year increased by 157 per cent to €41.2 million.

The company sold 94 homes during the first half, compared to 105 for the whole of last year. It retained its full-year objective of between 375 and 400 units and 2019 target of 1,200.

“We’re currently building on nine sites which will deliver 3,250 new homes,” the chief executive said in a statement alongside the publication of the interim results. “The quality of our land-bank and range of houses and apartments are meeting the needs of distinct segments of the market from first-time buyers to people trading up or downsizing.”

While the average price of unit sales completed in the first half of the year was just over €280,000, according to Davy calculations, the forward sales average was €397,000. The increase is down to sales at the company’s luxurious residential scheme, called Marianella, in Rathgar in the heart of Dublin 6 where prices for a two-bedroom apartment start at €525,000.

By contrast, starting prices at the likes of its Shackleton Park housing development in Lucan are under €300,000.