Housing slump 'could lead to zero growth'

House building could slump to the point where just 33,000 new homes will be completed in the Republic next year, a new industry survey says. Barry O'Halloranreports.

A fall on this scale could mean zero economic growth in 2008, and the loss of anything between 30,000 and 60,000 jobs, analysts said yesterday in reaction to the news.

The initial findings of a Construction Industry Federation (CIF) survey of members and local authority figures show that 33,000 new houses will be built in the Republic in 2008.

This is close to a third of the 88,000 record reached last year.

The forecast is between 20,000 and 30,000 less than most estimates for next year, and is the lowest prediction yet for the sector. It is also less than the 45,000 predicted by the federation at its annual review two months ago.

The CIF has passed the findings on to the Government, whose own forecast for next year, produced by DKM Economic Consultants, stands at 60,000.

This figure is likely to form part of the Government forecast of 3.5 per cent growth next year. This is the estimate on which Minister for Finance Brian Cowen will base next month's budget.

AIB chief economist John Beggs said yesterday that, if new house building was to fall to this level, economic growth would slump to "zero". However, he said he was "dubious" about the CIF's housing forecast.

Davy Stockbrokers' chief economist Robbie Kelleher said that growth would drop to 1.5 per cent or so in those circumstances.

He said that over 60,000 jobs could be lost in the building industry over the two-year period from 2006 to 2008.

"It would still be a hell of an achievement if we were to maintain gross domestic product growth at over 1 per cent if house completions fell to that level."

Mr Kelleher said that Davy is likely to cut its current prediction of 55,000 new house completions in 2008 to somewhere between 45,000 and 55,000.

While the economists questioned the CIF figures, a spokesman explained that they were based both on feedback from members and an assessment of housing starts and registrations in the State's main population centres over the first nine months of the year.

Those figures show that the number of housing starts is down by 49 per cent in Cork, 39 per cent down in Dublin city and county, 74 per cent down in Limerick, and 69 per cent down in Waterford.

"What we are finding is that most of the houses that were sold in the country during that period related to contracts that were entered into in 2006," the spokesman said.

"Our members are saying that they can't build houses if there is nobody there to buy them."

He also warned that the falling housing market was hitting sentiment in the commercial construction sector, one of the areas that most observers believe will support growth in the industry next year.

The CIF spokesman pointed out that just €3 billion of the €12 billion invested last year by Irish people in commercial property was invested in the Republic.

"Sentiment is drifting against that sector as well," he said.

The CIF argues that stamp duty is increasingly acting as a bar to investment in this sector.

Its spokesman pointed out yesterday that an Organisation for Economic Co-operation and Development (OECD) study found that at a 9 per cent average, the Republic had the highest rate of property transaction tax of the Paris-based body's member countries.