Goodbody Raises Forcast for Housing Completions - Construction Network Ireland - Construction Network Ireland

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Published in Construction on 07/08/2020

Goodbody Raises Forcast for Housing Completions

CNI Editor reports

The slump in home building because of Covid-19 has been much less severe than feared, particularly in rural areas where one-off house construction is the norm.

Stockbroker Goodbody previously warned that home building would collapse in the second quarter by at least 75pc.

Instead, completions actually fell by only 33pc in the April-June period versus 2019.

“We made our previous predictions around the middle of May when the country was still in lockdown. Obviously we were too pessimistic,” said Dermot O’Leary, chief economist at Goodbody.

Of 3,200 housing units completed in the last quarter, 1,000 were single homes – only 24pc lower than a year ago.

As a result, Goodbody has sharply raised its forecasts for housing completions this year by 2,500 to 16,500, and in 2021 by 3,500 to 19,500. However, that is still far short of the pre-Covid expectation of 25,000 homes being built this year.

And Mr O’Leary warned that the pipeline for new projects was looking relatively weak as developers focus on completing existing projects to meet immediate cash-flow needs.

“Builders are focused on finishing developments to sell homes and take in the cash. They don’t have much focus on starting new developments,” he said, noting that housing commencement numbers currently were significantly lower than completions.

“So the hangover from lockdown may be longer. The pipeline is not as strong going into the final half of the year and into 2021.”

Mr O’Leary said the market still suffered from a State grant for first-time buyers that, at least in Dublin, encouraged developers to raise their average home prices nearer to the scheme’s cap of €500,000. He said the scheme needed to spur builders to reduce home prices to nearer the €350,000 limit of affordability common to two-wage households.

The new Government “has missed the opportunity to tighten up criteria, to incentivise builders to build into that first-time buyer sweet spot”.

When asked why home building didn’t fall as steeply as expected, Mr O’Leary said analysts had been surprised by builders’ ability to adjust to Covid-19 risks on site.

“Productivity hasn’t been affected to the extent that many feared when sites reopened,” he said. “Social distancing hasn’t had as big an effect on productivity as we may have thought. June was a lot better than May.” Many sites now “are just better organised”, he said.

“You have a slot of time for the plumbers to come in. They finish and then the tilers, or the plasterers, come in. There’s efficiencies coming in from better organisation of the different duties. Workers used to get in the way of each other on a site pre-Covid.”

Goodbody found that completion rates fell the most in Dublin, where worker-intensive apartment projects are concentrated. Housing completions in the capital were 48pc lower than a year ago.

“Apartment completions are especially difficult when you have social distancing requirements,” Mr O’Leary said