Builders are slowing the rate at which they finish new homes as high prices put off potential buyers, a report published on Thursday says.
The number of new homes built in Dublin tumbled 17 per cent in the three months ended June 30th, according to research by stockbrokers Goodbody.
The fall in house construction in the capital drove an overall drop in the rate at which builders are completing new homes across the Republic, the firm's economists, Dermot O'Leary and Alexander Wilson, say.
They estimate that 4,900 dwellings were built in the second quarter of the year, 11 per cent more than during the same period in 2018, but the slowest rate of growth since the final months of 2013.
While numbers fell in Dublin, the economists say the number of new homes built in the capital’s commuter belt grew by 50 per cent in the second quarter of the year.
The southwest had the strongest growth, at 64 per cent, but the the report notes that that was “coming off a low base”.
Goodbody has cut its forecast of the number of new homes likely to be built in the Republic this year to 21,000 from 22,000. “This analysis supports that view,” Mr O’Leary and Mr Wilson state.
The firm’s forecast is based on a growing number of new homes left unsold because people cannot afford to buy them.
New home sales fell 8 per cent in Dublin in the first half of the year, while purchases of properties priced above €500,000 dived 21 per cent. Sales of homes costing less than €250,000 also fell sharply.
However, sales of homes costing between €325,000 and €400,000 – which the economists say the “median first-time buyer” can afford – rose in Dublin.
Outside the capital, sales of properties in the same price range grew rapidly in the first half of the year, while the overall increase in transactions was 7 per cent.
The economists say the figures show househunters only buy properties they can afford. After publishing the report, Mr O’Leary said that extra costs such as land and Government levies were adding to house prices.
He and Mr Wilson note that Central Bank lending rules, limiting mortgages to 3.5 times a buyer's salary and demanding a 10 per cent deposit from first-time purchasers, influence affordability.
James Benson, Irish Homebuilders' Association director, blamed the lending rules, and taxes and levies imposed by the State, for the gap between prices and what buyers can pay.
He warned that if these buyers remained “locked out” of the market, builders would find it harder to finance development and the rate of construction would fall.
Mr Benson said the Government should extend the help-to-buy scheme, which gives new homeowners a tax break on mortgage payments, and also introduce a shared-ownership scheme.
“The slowdown in completions is due to a combination of factors, some within the Government’s ability to address relatively simply,” he argued.