Housing starts dropped 18 per cent year-on-year in January, according to the latest research from Davy Stockbrokers.

It said starts have fallen significantly in three out of the past four months.

From August 2006 to January 2007, starts have slipped by 8 per cent year-on-year, according to Davy analyst Rossa White.

However, that followed a strong May-July period when starts rose by 37 per cent compared to the same period in 2005.

Davy said that starts have slowed in response to weaker final housing demand and as a payback for the spikes last summer that were spurred partly by the expiry of tax incentives.

It discounted weather as a contributing factor.

"It is hard to put weather forward as an excuse for lower starts: although January was particularly wet it has been mild all winter."

While Davy said that housing starts were volatile, and that the reported series was not seasonally-adjusted, it said that its in-house seasonally-adjusted series confirmed the housing starts slowdown.

"The 12-month running total of starts peaked last September, and now stands at an eight-month low," it said.

Davy said it was sticking with its forecast of 87,000 completions for this year, a 1.5 per cent decline on 2006, but added that the risk was on the downside.

"That forecast is dependent on starts stabilising in the months ahead.

"Builders' confidence has rebounded according to the EC, but much depends on demand in H1," the stockbroker said.

Ulster Bank chief economist Pat McArdle said the figure was indicative of a weaker start, but warned against reading too much into the January figures.

"I would not place undue reliance on one month's figures," he said.

"I would wait for the figures for the first quarter before I draw conclusions, but I do think we are headed for a situation where we have passed the peak of housing output."

Mr McArdle said he expected to see a modest decline in housing output this year, followed by a bigger decline in 2008 as supply and demand come into line.

"We are getting back to a more sustained long-term level of housing output."