Developers 'curtail home building plans' as prices start to fall
Planning permissions and land sales are slowing down, say property experts
Developers have begun curtailing their medium and long-term housebuilding plans, as supply comes close to meeting Ireland's housing demand, leading property experts have claimed.
Housebuilding has increased from a low base following the financial crash.
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Around 18,000 homes were built last year, according to the Central Statistics Office. Around 22,000 new homes are expected to be completed this year.
House price inflation has fallen to 3.1pc nationally in recent months, after years of double-digit growth.
John McCartney, research director with estate agent Savills, said the "evaporation" of price inflation was due to supply meeting demand. "In the longer term, construction employment has been flat for the last nine months, planning permissions are also going backwards, and land sales have slowed," he told the Sunday Independent.
"All of those are the materials needed to build a house, which suggests to me that developers have received the signal from market pricing, and we are getting to the point where the market is supplied and developers are trimming their medium and long-term production plans into the future."
McCartney said that developers were "taking a view that they have enough capacity".
"This is great because the one thing we wanted to avoid was an avalanche of overbuilding because it creates misery all around," he said.
"We're heading to an orderly stabilisation of output that's in keeping with the market."
McCartney said house price falls in Dublin were likely before the end of the summer. There has already been some evidence of this in asking prices.
He also dismissed suggestions that the fall in house prices and demand was due to the Central Bank's macro-prudential rules.
The rules, which were introduced in 2015, limit mortgage lending to 3.5 times a purchaser's income with some exceptions. "To me, the mortgage rules explanation is not entirely convincing because Ireland is divided into eight regions and house price inflation is slowing in all of those except one," McCartney said.
"In some of those regions, house prices are slowing and are already relatively low so nobody could argue that loan-to-income ratios are binding."
The Border region is the only area where growth is continuing to increase, but it also has the lowest average price, at €139,000.
McCartney's view that the housing market is reaching a point of appropriate supply was echoed by TUD housing lecturer Lorcan Sirr.
"If prices are beginning to level off, you'll find developers will slow on output unless they have bought land at a very cheap price," Sirr said.
"Equilibrium has been met at a very low point, much lower than people could have thought. It looks like supply could be meeting demand at a number of around 20pc of previous expectations."
Sirr said that of the 18,023 new homes built last year, 9,000 went to the private market, with the remainder made up of one-off homes and State-backed dwellings.
"We're moving towards a model of UK housebuilding, where the top-10 housebuilders account for 60pc of housebuilding; they're very good at market analysis," Sirr said.
While inflation in the housing market has slowed, Sirr said that there was an "obvious discrepancy" between the demographic need of the country and the demand from the market. He said the slowdown "highlighted the gap" between what people need and what they can afford.
Sunday Indo Business