Irish residential construction activity contracted for a 17th straight month in February, placing a risk over the Government’s target for home completions to rise 2.3 per cent to 33,450 units this year, a new survey found.
The BNP Paribas Real Estate Ireland construction purchasing managers index for residential activity rose to 49.8 in February from 48.2 for the previous month. Still, a reading under 50 represents a contraction.
“At this early stage it looks like the rapid growth in housing completions over recent years could stall a bit in 2024,” said John McCarthy, head of research at BNP Paribas Real Estate Ireland, adding that the Government’s target for this year was “at risk”.
Mr McCarthy suggested two explanations for the 17th straight month of residential activity contraction.
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“Firstly, the acceleration in completions has outstripped the acceleration in commencements; Nearly 3,600 more units have been finished than started over the last 18 months, and this has naturally dragged on on-site activity. Secondly, probably due to continued uncertainty about the economy and construction costs, there has been a slowdown in home improvement activity.”
In addition the European Central Bank’s (ECB) main lending rate rose from zero to 4.5 per cent in the 15 months to last September, though financial markets currently expect it to fall to 3.5 per cent by the end of this year.
Mr McCarthy said that sustained hiring in the homebuilding segment of the construction industry supported the medium-term outlook.
The number of new homes built in Ireland last year increased by 10 per cent to 32,695, the highest level since before the property crash, according to the Central Statistics Office.
The new chair of IDA Ireland, Feargal O’Rourke, said recently that homebuilding needs to increase to around 50,000 units a year to meet underlying demand and keep the State attractive as a location for foreign direct investment.
The total construction activity index edged up to 47.4 in February from 45.9 a month earlier. The subindex reading for commercial activity increased to 47.2 from 44.7, while the future activity index jumped to 64.9 from 58.6.
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