A GLUT of new houses for sale has led to builders cutting back on the construction of homes.
There was a sharp slow-down in the growth of new housing output in the April to June period, according to the Goodbody Stockbrokers housebuilding tracker.
But apartment construction is surging as investment funds pour money into the development of these units.
Affordability has now become a major constraint for first-time buyers. All of those seeking a mortgage are restricted to borrowing no more than three-and-a-half times their income, unless they get one of the small number of exemptions.
The sharp rise in house prices over the last few years means the income limit rule is pricing many buyers out of the market.
Goodbody economist Dermot O’Leary said there is now a rising inventory of unsold stock forming for house builders.
Many private builders cannot get new funding until they sell completed units, prompting a 4pc fall in sales for the new homes market.
The report shows that there has also been a big fall-off in sales of homes priced at more than €500,000.
Mr O’Leary said the income limits for borrowers, known as the macro-prudential rules, were having a big impact across the property market.
“The analysis points to weakness in sales at the higher-price points, highlighting the importance of affordability in selling new homes in the context of the binding macro prudential rules.”
Calculations by another economist estimate has found that Dublin house prices are now nine times average earnings. KBC Bank’s Austin Hughes has also calculated that in the rest of the country prices are just over six times average earnings.
The Goodbody housebuilding tracker found that new home completions fell across the country, due mainly to less homes construction activity in Dublin.
Mr O’Leary estimates that 4,900 new units were completed in the second quarter of this year.
This is up 11pc compared with a year ago, but it represents the slowed rate of growth for six years.
“We have reduced our completions forecast for 2019 to 21,000 on the back of a rising inventory of unsold new homes,” Mr O’Leary said.
In Dublin, new home completions actually fell, by 17pc. But there was strong growth in construction in the Dublin commuting counties.
Sales for stock-market house builders, such as Glenveagh and Cairn, continue to grow strongly, bucking the trend for the market.
The fastest growth in output was for apartments, growing by 28pc in the second quarter compared with the same three-month period last year.
Cuckoo funds are buying up entire apartment blocks, with other funds putting up the money for builders to construct apartments for rent.
New home sales fell 8pc in Dublin in the first quarter. For homes that cost more than €500,000 there was a 21pc fall, according to Goodbody. Over the €500,000 price point buyers do not qualify for the Government’s help-to-buy scheme.
However, sales grew in the €325,000 to €400,000 price bracket in Dublin, a price range considered affordable for typical first-time buyers.
Outside Dublin sales grew 7pc on the year, with rapid growth in the €325,000 to €400,000 price bracket.