Demand for houses and apartments remains strong, says Cairn

Home builder Cairn said demand for houses and apartments remained strong but warned build costs are still being inflated by rising prices for materials and labour.

The company issued a trading update ahead of its annual general meeting (agm) in Dublin on Thursday.

Cairn said its closed and forward sales pipeline had grown to 1,905 new homes, with a net sales value in excess of €685 million. That compared with 1,503 closed and forward sales with a net sales value of €534 million at the start of March.

But Cairn chief executive Michael Stanley would not be drawn on the company’s outlook for house prices this year. “We don’t genuinely ever quote on [the outlook for house price inflation] to our investors,” he said after Cairn’s agm on Thursday.

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However, he said that the home builder tracks the sales price of new homes closely. For the most part, Mr Stanley said, new home price inflation has “substantially lagged” behind the level of increase seen in secondhand prices in recent years.

“Asking prices set by agents [for existing homes] are set by people’s aspirations and, in my view, are not the true measure of the health of the underlying sector,” he said. “And what people need to look at [is] the cost of new homes, that standard to which they’re being built and how do they compare over multiple years.”

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While input costs – particularly for natural materials such as timber and rebar steel – have “levelled off to a kind of trickling increase”, Mr Stanley said the prices Cairn is paying are still elevated. “There are ups and downs,” he said. “There are still materials that are moving up, unfortunately, but [it is] much less volatile. I will be hopeful that next year – without any international, additional crisis that we can’t predict – that costs should really stabilise and hopefully start reversing into next year.”

Among the developments Cairn has under way is Seven Mills, Clonburris, with the first phase of 569 new homes due to be delivered this year. Cairn has also closed its first transaction with the Land Development Agency (LDA) with the Archers Wood development at Delgany in Co Wicklow.

But build cost inflation is persisting, including in infrastructure, materials and labour, with the company anticipating total build cost inflation of €10,000 per unit, or about 4 per cent, in its fiscal year 2023.

Looking ahead to the full year, the company said it was reaffirming its guidance of turnover in excess of €650 million from up to 1,800 closed new home sales. More than 800 homes are classed as social and affordable. Operating profit is also expected to grow, with progressive ordinary dividends of between 40-50 per cent of FY23 profit after tax.

Cairn has already repurchased 11.2 million shares through a €40 million share buyback announced in March, at an average price of €1.03 per share.

“Ireland’s relative economic success in challenging times must be underpinned by more significant investment and new housing delivery, from both the State and the homebuilding industry,” said Mr Stanley. “It is very unfortunate that there has been such a significant increase in the cost of delivering new homes in Ireland and there is no sign these additional material and labour costs are unwinding.”

Mr Stanley welcomed the supports put in place by the Government, including the shared equity and Help to Buy schemes, with the focus on scaled affordable rental accommodation through cost rental policy initiatives also highlighted.

“The resulting increase in the quantum of State-owned apartment developments, built to the highest standards, in partnership with AHBs [Approved Housing Bodies] and the LDA, will have positive benefits, for both the current housing and rental market challenges and a future sustainable economy,” he said.