New house starts in urban areas show sharp decline

New house starts in key urban areas declined sharply between September and the end of the year, according to leading estate agents Hooke and MacDonald. If the report is confirmed by the final quarter figures from Department of the Environment, then first-time buyers will find it inceasingly difficult to get starter homes in the early months of this year, despite a range of Government measures.

Hooke and MacDonald, which specialises in the new homes market, say that new house starts in the greater Dublin area (Dublin, Kildare, Meath and Wicklow) were 45 per cent lower than in the same months in 1999. There was also a 24 per cent decline in new building activity on housing sites in Cork, Galway, Limerick and Waterford.

In the case of apartments, there was a 26 per cent fall off in the greater Dublin area and 12 per cent in the four other cities. In a report on the apartment market, the agents say the decline in building activity in the run-up to Christmas is a result mainly of the anti-investor measures introduced by the Government, the new Planning and Development Act which reduces the time frame of planning permissions from five to two years as well as disenchantment over the 20 per cent allocation of sites for social housing.

The report claims that the planning system has failed to meet the demands of our expanding economy and growth in population. It is now taking at least two years to get any major residential development approved.

New starts and registrations normally provide an accurate insight into the current and likely supply position on housing sites. Hooke and MacDonald says the Government will have an opportunity in the Finance Bill to "take corrective action before the storm clouds gather rather than after the damage has been done".

Despite the disturbing signs at year end, new house completions in 2000 are expected to be 7 per cent higher than in 1999, going from 42,224 to 45,600. However, completions in the greater Dublin area were up by a mere 0.7 per cent, 14,280 to 14,381, according to the report. There was also a rise of 8 per cent in Cork, Galway, Limerick and Waterford, where the numbers increased from 10,076 to 11,901. Completions in the remainder of the country were 11 per cent higher than in 1999, rising from 18,268 to 20,313 in the year.

The report predicts that new house prices will rise by up to 10 per cent this year, with variations depending on the quality and convenience of the location. Construction and labour costs in Dublin city centre mean that overall building costs here are more than double those on suburban housing schemes. Without a strong investor element in the purchase of city centre units, these schemes would not be viable and would not be built.

This will equally affect the docklands area which is in need of rejuvenation. Several top developers have shifted from the residential market to the commercial sector because of Government action against investors following the publication of the three Bacon reports. Also, many sites earmarked for residential schemes in urban areas are now to be used for commercial buildings. Hooke and MacDonald does not envisage much residential construction activity in Dublin city centre and the docklands this year.

However, there will be an increased number of homes available in suburban locations like Blanchardstown, Swords, Finglas, Drumcondra, Lucan, Rathfarnham and Loughlinstown. An improved range of one and two-bedroom apartments and two and three-bedroom starter homes are being designed and built for first-time buyers. The report says that overall demand for new homes will remain much higher than supply as a result of the failure to increase supply to deal with a rising population, new household formations, inward migration, a relatively low interest rate regime and parental support for first-time buyers.