Builders waiting on banks to tempt new home buyers into market
The two Dublin quoted housebuilders Abbey and McInerney are both sound bell- weathers for the home-building sector, although they have a slightly different set of exposures. Abbey has operations in Ireland and Britain. McInerney is exposed to the Irish and Spanish markets, which may help explain why it has suffered the bigger drop in value.
In the past year, McInerney has dropped from a high of €1.65 to its recent low of around €0.10, a drop of almost 95pc. The share stats for Abbey are a good deal better. While it did drop to a low of €2.68 from last year's €6.42 high, it has since recovered to €3.36 which means it is down "only" 48pc.
McInerney issued a pretty dire trading statement at the end of January in which it said that no improvement in the housing market can be expected in the short-term.
It also warned that updated valuation on its land bank will result in a further material impairment charge when it reports on 2008.
"Measures to improve liquidity in the financial system are critical to assist the availability of funds for homebuyers," it said. These measures could have a significant impact on both companies. and if measures like those being promoted this week by Ulster Bank, promising to limit the impact of negative equity traps on new homebuyers are effective, could see some recovery in house sales.
Data from Ireland and Britain paint a pretty bleak picture. Home bond registration figures plunged to a record low of 241 units in January.
The level of registrations, generally viewed as an accurate barometer of construction activity, is almost 50pc behind the previous record low of 478 set last November.
In the month, the annual rate of decline was 83pc, according to Goodbody Stockbrokers, who said the downturn in the sector shows little sign of easing.
The broker expects that just 23,000 new houses will be built here this year and just 20,000 new homes will be built in 2010.
"While the contraction in the investment area of the Irish economy has now firmly spread to all other sectors, the correction in construction activity, the instigator of the recession, shows little sign of easing," Goodbody economist Deirdre Ryan wrote in a note.
In Britain, data from the Royal Institute of Chartered Surveyors (RICS) was slightly better, giving some hope of a pick-up in activity. The RICS January survey saw the net house price balance fall to 76.3 from 73.9 as prices remain depressed by the large number of unsold homes. The house price balance measures the number of surveyors reporting a rise in prices minus those reporting a fall.
New buyer enquiries increased for the third consecutive month in January. Davy analyst Robert Gardiner said this tallies with reports from the new-build sector that visitor traffic improved in recent weeks.
However, we will have to see evidence that the banks are lending freely to new home buyers before a decent upswing in either Abbey or McInerney can be expected.
- Pat Boyle
