Thursday 22 February 2018

House-building likely to pass 20,000 mark in 2018 - Investec

Governor of the Bank of England Mark Carney
Governor of the Bank of England Mark Carney
Donal O'Donovan

Donal O'Donovan

Banks and other property owners will be among the biggest winners from a sharp rise in house prices set to continue into next year, according to the latest forecast from Investec.

The specialist bank thinks house prices will rise 10pc this year, moderating only slightly to increase by 8pc in 2018, according to the latest Investec Irish Economy Monitor.

Projected growth in the wider economy has been lifted to 4.8pc this year by Investec, which means the country is on track to retain its status as the fastest growing EU economy for a fourth successive year.

For all of that period so far, house-building has lagged significantly behind improvements in the rest of the economy, but Investec's Philip O'Sullivan said output is starting to improve.

Investec thinks completions of new homes will hit 19,000 this year, 3000 more than originally thought.

That is based on the 25pc growth in completions recorded in the period to the end of May.

Housing completions will be around 21,000 next year and increase to 23,000 in 2019, Investec said.

That is approaching the figure of 25,000 new homes a year which is now widely accepted as being required to keep up with current demand.

However, Investec thinks new household formation is running at 30,000 a year, suggesting needs are higher than had been thought.

With a near decade-long backlog already built up and demand increasing year by year, the bank said it will still be some time in the next decade before supply rises to meet demand.

Brexit remains the key threat to the Irish economy and public finances, Investec said.

Sterling and dollar moves have already hurt many firms this year and a moderation in export growth is likely a function of adverse currency moves, the specialist bank added.

The UK remains an important market for Ireland, but Investec said the "umbilical cord" between the two countries that persisted after independence has been unwound.

The ultimate impact of Brexit won't be known until the nature of the EU/UK settlement emerges, the bank said.

Even so, any weakening in British demand is bad news for Ireland.

Yesterday, Bank of England governor Mark Carney said the central bank cannot be expected to nullify the likely hit to the economy from Brexit, although it could influence how that hit is spread across Britain.

Hosting an event marking the 20th anniversary of the BoE's independence from government, Mr Carney, inset, said Britain's economic prosperity would hinge on the final arrangements for its divorce with the European Union, as well as the government's fiscal policies.

"Even though monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU, it can influence how this hit to incomes is distributed between job losses and price rises," Mr Carney said in the text of his speech.

Irish Independent

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