Housing output set for further fall

Irish housing output is set to decline further in next two years as the market continues to suffer the effects of oversupply.

A report from Goodbody Stockbrokers said house completions could fall as low as 12,000 this year and may drop below 10,000 in 2011.

"Tighter credit conditions continue to be an issue for both developers and potential homeowners, but there is also a need to curtail new supply until the vacant housing stock is reduced," said Dermot O'Leary, chief economist.

Oversupply is a particular problem in the midlands, the report said.

The predicted declines follow a 48 per cent drop to 26,820 units last year. Housing starts were down 63 per cent in the first 10 months of 2009, with commencements on larger developments down by 83 per cent.

In 2006, building completions were as high as 90,000 units in 2006.

However, 2009 figures were still ahead of European averages, with completions amounting to 5.8 units per 1000 of population, compared to a estimated European average of less than four per 1,000.

Separately, the Housing Affordability Index from EBS and economic consultants DKM found houses are more affordable now than at any time in the last 25 years.

Low interest rates, falling house prices and weak consumer confidence are contributing to the current situation, the report said.

According to the study, couples are spending 13.4 per cent of their income on a mortgage, compared with 26 per cent just over three years ago.

Dara Deering, EBS director of membership business, said property prices had plummeted more than a quarter since 2006, giving a boost to first time buyers.

"First time buyers considering entering the market over the coming 12 months should expect to see this contraction continue, albeit at a slower rate than last year," Mr Deering said.

"In addition to falling prices there are a number of other environmental factors which are helping to ensure that affordability levels continue to improve.

Prices for houses nationally stand at €83,000 and €137,000 in Dublin, Mr Deering said.

However, the housing sector is still facing difficulties as buyers are reluctant to enter the market.

Additional reporting: PA