House prices could rise by 5% this year, Glenveagh boss warns

Company on track to build 1,150 homes this year

Irish house builder Glenveagh expects to deliver 1,150 new housing units this year. Photograph: iStock

Irish house builder Glenveagh expects to deliver 1,150 new housing units this year. Photograph: iStock

 

House prices could rise by 5 per cent this year, Stephen Garvey, chief executive of home builder Glenveagh Properties, predicted on Thursday.

Glenveagh said it was on track to build 1,150 homes this year, despite the Covid-19 lockdown, while it had sold, signed or had reservations for all properties.

The firm plans to return €75 million to investors through a share buybacks beginning on Friday.

Speaking after the company’s annual general meeting, Mr Garvey noted that building materials costs were rising.

“But we see house prices moving 5 per cent in line with cost inflation at this moment in time,” he added.

He confirmed that steel, timber and, more recently, plastics prices had been rising since construction returned from months of lockdown in April.

“I suppose the industry is facing a lot of challenges,” Mr Garvey observed, pointing out that it had been closed for the first quarter of the year.

Timber-frame plant

However, he added that Glenveagh had its own timber-frame manufacturing plant and owned its own quarry, allowing the Dublin-listed builder to manage rising costs.

The group believes that inflated materials’ costs will feed through to the homes it is building for 2022.

Mr Garvey warned that problems including building costs and planning would continue to hinder the efforts to reach the 35,000 new homes a year needed to end the Republic’s housing shortage.

Glenveagh Properties chief executive Stephen Garvey said the home builder intends almost tripling output to 3,000 homes a year from 2024.
Glenveagh Properties chief executive Stephen Garvey said the home builder intends almost tripling output to 3,000 homes a year from 2024.

Despite changes to planning laws designed to speed up housebuilding, he noted that significant numbers of decisions to grant permission still wound up in the courts.

“Prices will continue to rise until supply gets better,” he warned. Mr Garvey argued that population growth, demand and the planning system together created the housing shortage.

Glenveagh said it remained focused on building homes for owner-occupiers, with just a small number of its properties destined for investment funds, blamed in some quarters for aggravating the housing problem.

Meanwhile, Mr Garvey said that Glenveagh intends almost tripling output to 3,000 homes a year from 2024.

In a trading update, the group said it had available funds of €230 million. It has set its medium-term return on equity target at 15 per cent from 2024.

Glenveagh said the ongoing housing shortage combined with higher savings rates had created a strong market backdrop.

New sites

The company will begin building for its 2022 order book over the summer and has started work on three new sites where it will begin selling properties next year.

The homebuilder also won approval for its first partnership scheme with local authorities in Dublin, with Fingal County Council voting in favour of proceeding with the proposed development of 1,200 new homes at Ballymastone, near Donabate in north Co Dublin.

Glenveagh said it would move forward with the formal planning application, with development expected to commence in 2022.

The company spent about €48 million buying eight sites, which it estimated could hold more than 1,900 houses. Glenveagh now has enough land to build 17,000 homes.

In the longer term, the builder said the board would ensure that it had the resources to meet its 2024 target, as well as having the ability to invest in the next phase of growth. It intends to maintain a strong balance sheet, with debt not exceeding 15 per cent of net assets.

On that basis, the company said it had calculated that it held €75 million in excess capital, which it would return to shareholders through the buyback programme.

Executive chairman John Mulcahy has told the board he will move to the role of non-executive chairman from January 1st. Glenveagh said it was confident of further growth in the future.