Uncertainty over how the National Assets Management Agency (Nama) will function and the time being taken to set it up has caused “effective paralysis in the industry,” according to a new report.
Merrion’s Spring 2009 Housebuilder Survey said “even if the end result is positive, respondents believe that this uncertainty is resulting in the house building market coming to a complete standstill.”
“Our conclusion from the survey is that housebuilders expect the downturn in the Irish new residential market to continue well into 2010,” Merrion analysts John Mattimoe and Killian Jones said.
Three quarters of Irish house-builders have stopped work because of the backlog of unsold properties, the report found.
It estimates 16,000 units will be built this year and that the oversupply of new houses will not now be cleared until the middle of next year. Merrion expects completions to fall to 14,000 next year. This compares to 88,000 completions at the peak of the housing boom in 2006.
Almost all builders’ surveyed reported a drop in selling prices with 40 per cent of respondents saying they have fallen by more than 20 per cent in the last 12 months with 28 per cent saying prices will fall again in 2010. No survey respondent expected prices to rise this year or next.
Builders said the majority of houses that were selling were either at or below build cost and they see little scope for further price reductions.
The 25 companies surveyed were unanimous in their agreement that land prices have fallen sharply with most believing “that there is currently no market for development land in Ireland”.
Over two-thirds of respondents believed land prices had halved with almost all saying there was effectively no market for land due to valuation difficulties.
A number of respondents said land values may now have fallen to agricultural prices or even zero when building costs, VAT and other factors were included.
The survey of 69 construction firms in mid-May drew 25 responses from firms that built 2,300 houses last year, or around 4 per cent of the total. It does not include builders of one-off units or contractors.