Only 7,500 new houses to be built in Republic this year, experts predict

THE NUMBER of new houses built in the Republic could slump to 7,500 this year, while employment in construction as a whole is set to drop below 100,000 in 2011.

Annette Hughes, director of DKM Economic Consultants, which produces regular reports on the construction industry for the Government, said yesterday that the firm now expects that just 7,500 new homes will be built in the Republic this year.

This will represent a significant fall on the record 90,000 houses built when the boom peaked in 2006. Previous predictions for the number of house completions this year have been about 10,000.

Ms Hughes said that employment in the industry is also falling sharply. Construction employed about 400,000 people directly and indirectly at the beginning of 2007. She fears that this could fall to below 100,000 by next year.

Its contribution to the overall economy has slumped dramatically. At its peak, construction contributed €40 billion to the Republic’s wealth. By last year this stood at about €17 billion and next year this could fall to €11 billion.

“The industry is in a really bad place at the moment,” Ms Hughes said yesterday after speaking at Euroconstruct, a conference of European construction economists at Dublin Castle.

She explained that private investment in construction has evaporated while public spending on roads, transport and schools is also slipping rapidly – from a figure of €8.5 billion pledged in the October 2008 budget to €5.5 billion this year.

Ms Hughes said that while the industry got too big at the height of the boom, accounting for 25 per cent of the economy, it is now shrinking to a point where it is smaller than it should be. She said in most EU countries construction accounts for about 10 per cent of the economy. “In Ireland it is reaching the point where it is falling back to around 8 per cent.”

Ms Hughes said that the only solution for the Irish construction industry is Government spending on infrastructure. She said the State needs to find ways of funding developments that are needed.

She argued that the Republic needs a modern infrastructure to develop its economy.

Moreover, Ms Hughes added that spending could be targeted at vital projects. “Money should not be spent on something that isn’t needed.”

She also stressed that depending on exports alone to drive a recovery may not be enough and warned that sectors such as construction will be needed as well.

The Euroconstruct conference addressed the overall state of Europe’s building industry. DKM contributed to a report on the general state of construction in the EU.

The industry has been shrinking for the last three years. But even following a near 9 per cent decline in 2009, it was still worth €1.3 trillion and employed 12 million people.

A clear division now exists between east and west. The industry in eastern Europe, and particularly Poland, is continuing to grow while it has been falling in the west. However, there are now signs of a recovery in countries such as Germany.