Lagging home sales likely to halt upswing in supply, Goodbody says

Broker says its forecast for 24,000 housing completions now unlikely to materialise

The report indicated housing completions were up 34 per cent in the third quarter of 2019, bringing the total so far this year to 15,400. Photograph: Rui Vieira/PA Wire

The report indicated housing completions were up 34 per cent in the third quarter of 2019, bringing the total so far this year to 15,400. Photograph: Rui Vieira/PA Wire

 

Goodbody says its forecast for 24,000 housing completions next year is unlikely to materialise because of a slowdown in the market.

“With unsold stock rising due to lagging private new home sales, the risks remain tilted to the downside to our completions forecast of 24,000 for 2020,” it said in it latest house-building tracker.

The report indicated housing completions were up 34 per cent in the third quarter of 2019, bringing the total so far this year to 15,400.

Goodbody, which uses Building Energy Regulation (BER) data to compile its figures, said the full-year 2019 tally may modestly exceed its forecast of 21,000 units.

Several agencies, including the Economic and Social Research Institute, estimate that annual housing demand in the Irish market is 30,000-35,000.

Despite the mismatch between supply and demand, headline property price inflation has slowed to around 2 per cent, its lowest level in six years. In Dublin prices are actually falling.

Goodbody chief economist Dermot O’Leary said he expected the level of completions next year to be slightly below 24,000 but he noted commencements were still up 20 per cent in the year to date “so there is still forward momentum”.

“A major factor over the next few years will be whether the surge in planning permissions for apartments that has been seen will be converted into actual build. There is a lot of scepticism that it will,” Mr O’Leary said.

Commuter belt

The Goodbody report noted that apartments represented a growing share of residential completions. It estimated that apartment completions grew 78 per cent year on year to 1,100 units.

“Given the costs of apartment delivery, viability appears only to be achieved in the higher-priced market of Dublin, resulting in a sprawl of lower-density housing outside the capital,” it said.

The report also highlighted what it called “a surge” in house building in Dublin’s commuter belt. This contributed to most of the growth in new dwellings, it said, noting that in the third quarter new dwelling completions grew 57 per cent year on year in Dublin’s commuter counties. In contrast, completions grew by just 9 per cent in Dublin.

The broker said the higher-end market in Dublin continues to be weak. Separate analysis of housing transactions points to strength at the more affordable parts of the market and weakness at price points above €500,000, it said.

New home sales grew 1 per cent in the first nine months of 2019, with sales above €500,000 down 17 per cent (-24 per cent in Dublin) and sales below €500,000 up by 4 per cent (-11 per cent in Dublin).

Property companies continue to outperform the rest of the market in terms of sales achieved in the year to date. Goodbody said this was a function of the larger proportion of its homes being in the lower price brackets, a function of their land banks.