Activity in the housebuilding industry contacted in the Republic in November for the first time since 2013, the year home prices reached a low point following the property crash, according to an Ulster Bank survey.
Ulster Bank’s latest purchasing managers’ index (PMI) shows that the reading for housing fell to 47.7 in November from 51.3 in October. The wider construction PMI result rose to 48.2 from 46.2 as activity in the commercial sector picked up while that in civil engineering continued to fall. A reading below 50 signals a slowdown in a sector.
Simon Barry, an economist with Ulster Bank in the Republic, said the slippage in residential activity was at odds with official hard data on construction, including housing starts and completions, which “continue to show robust growth in the sector”.
“We think that recent weakness in the housing PMI is perhaps more reflective of large, adverse moves in business sentiment generally – likely related to acute Brexit uncertainty – than of marked weakness in actual underlying housing activity,” Mr Barry said.
“We wouldn’t be surprised to see some reversal of recent housing PMI weakness in the months ahead, though we do think that the recent trend in the overall construction PMI is pointing to downside risks to the construction outlook as we head into 2020.”
The Construction Industry Federation estimates that house and apartment completions will increase this year to 23,000 from 18,072 in 2018. While completions are forecast to rise to 28,500 in 2020, well off a low of 4,575 seen in 2013, economists estimate that there is demand for about 35,000 new homes a year over the medium term at least.
Home price growth eased to an annual rate of 1.1 per cent nationally in September from 8.5 per cent for the same month last year, according to the latest figures from the Central Statistics Office. Dublin prices fell by 1.3 per cent.
Some observers have attributed lower-than-optimal building levels indirectly to the Central Bank’s mortgage lending limits, which the regulator decided last week to leave unchanged.
However, Central Bank governor Gabriel Makhlouf told the Oireachtas finance committee on Thursday that a range of things need to be looked at to boost supply.
These include planning regulations, taxation of land, availability of underlying infrastructure to facilitate development, and ability of the financial system to supply appropriate funds, he said.
PMI Index/Irish Times