Central Bank gets the blame as construction growth decreases
The Central Bank's new mortgage deposit rules have been blamed for contributing to a sharp fall in the growth of construction, with house building stagnating, a survey shows.
But the slowdown has spread into commercial and civil engineering as well.
While the construction sector remains in growth mode, the pace fell sharply in February, according to the latest Ulster Bank Purchasing Managers' Index. It is the fourth month that the pace of growth has eased.
Simon Barry, Ulster Bank economist, said the results point to a notable loss of momentum in construction activity, speculating uncertainty surrounding the mortgage rules may be partly to blame.
"Housing activity stagnated last month, a marked turnaround from the record rates of expansion recorded as recently as September of last year," Mr Barry said. "It could be that some of this weakness is linked to higher levels of uncertainty surrounding the housing market outlook related to the recently-introduced Central Bank mortgage lending regulations.
"However, the weakness emerging in the past couple of months has extended beyond housing.
"Activity has also softened materially in both commercial and civil engineering ... pointing to more broadly-based weakness."
The new rules announced in January stipulate borrowings by first-time buyers up to €220,000 will be approved with a deposit of as little as 10pc. But any amount over €220,000 will require a 20pc deposit for that portion of the mortgage. Non first-time buyers will have to come up with a 20pc deposit.
The PMI index dropped sharply to 52 last month, from 57.1 in January.
Anything above 50 signals expansion, and below that shows contraction. The data shows that the sector remains in growth mode overall, but that growth is weakening.
"The key feature of the February results is another sharp drop in the index which indicates that the pace of growth eased significantly," Mr Barry said.
"This follows the large decline also recorded in the January survey, and takes the growth in activity to its weakest in 18 months," he added.
A weaker rise in employment was also seen, with the rate of job creation the slowest since June of last year. Some panellists reported having taken on extra staff in anticipation of rising workloads, but others signalled a lack of new work to replace completed projects.