The number of new Irish housing units that will be built in 2015 will rise to about 10,000 following 8,800 completions in 2014.
Dermot O'Leary, chief economist at Goodbody, commented on Thursday: "How is housebuilding tracked in Ireland? There are two main official datasets that track residential housebuilding in Ireland, both reported by the Department of the Environment and Local Government (DoELG). Both have their deficiencies. A house “completion” is counted when the unit gets connected to the electricity network. Therefore, it is thought that a significant proportion of the increase in completions seen last year was due to the completion and connection to the electricity network of mothballed projects during the crash. As such, housing completions data may have been a poor guide of actual construction activity. The second data source is housing commencements. Up to yesterday, these were not available after February 2015 due to a change in the collection methods. The updated dataset now gives a truer picture of the actual level of housing construction, as a developer must notify the Local Authority if it is to commence a project in a particular month. One minor drawback is that it does not include the commencement of units being built for the local authorities themselves.
On Wednesday, the Society of Chartered Surveyors Ireland (SCSI) reported that construction sector output grew in volume terms by 10% in 2014 to €11bn and is forecast to increase by almost 26% over the next two years.
The SCSI said that the sector has turned a corner and prospects for the industry are brighter now than they have been in almost a decade. The SCSI’s ‘Irish Construction Prospects to 2016’ report — which was prepared by DKM Economic Consultants in conjunction with the SCSI — suggests that the growth in output will be driven by housebuilding and commercial property activity.
Andrew Nugent, incoming SCSI president, said; “The fact that the sector grew by 10% is positive and reflects improved economic conditions and confidence in the sector. However, the growth is still coming from a relatively low base and current output represents approximately 7% of GNP, which is still well below the 12% of GNP deemed to be a sustainable level according to European standards."
Housebuilding: Nugent also raised concerns about the actual levels of housebuilding completions recorded each year and said that the SCSI has reduced its housebuilding projections by around 20%.
"The official housing completion figures show that 11,016 units were completed in 2014. However, the commencement figures are far lower and this suggests to us that the actual level of housebuilding is actually lower than the completions figures suggest. This is due to the fact that the completions figures are based on the number of units connected for electricity.”
"It is our view that up to 20% of the units connected for electricity last year were actually built in previous years and were properties in receivership or in NAMA. On that basis, we believe that the actual number of new units built in 2014 was around 8,900 and that it will be around 10,000 in 2015 and 14,000 in 2016. This is significantly lower than other published projections and indicates that the new housing supply issue is even more serious than previously thought.”
Capacity constraints: According to the SCSI, the key challenges facing the construction sector remained access to development finance and also a lack of skilled people to meet industry capacity requirements. “There has been a decline in the availability of skilled trades people, specialist contractors and graduates entering the sector. While we were pleased to see a 27% increase in CAO applications for built environment courses, it will take several years for this to feed through into the sector," Nugent said.
Commercial Property Building: The report also highlighted the anticipated output of commercial property which is projected to be around €3.5bn over the two year period 2015-16. SCSI members also pointed to the shortage of prime office space in Dublin which is driving rents for commercial space upwards.
“The increase in rents due to a lack of supply is concerning but now that rents have reached a level where it makes economic sense to build again, we expect to see more commercial developments come on stream over the next 12-18 months. We must be careful to start planning our developments on a more regular basis to avoid the ‘boom-bust’ approach which causes excessive rent inflation and uncertainty in the market and continue to maintain our competitiveness," concluded Nugent.
© Copyright 2015 by Finfacts.ie