House building in Dublin, where demand is strongest, has stalled for the first time since 2015 amid concern that the Central Bank’s lending rules may be constraining affordability.
The latest Dublin Economic Monitor indicates that the annual rate of house completions in the capital fell by 13.7 per cent in the second quarter to just 1,628.
This was the first quarter of negative growth recorded in more than four years and comes amid a sharp slowdown in property price inflation.
The report, which is produced by EY-DKM Economic Advisory on behalf of the four Dublin local authorities, also details a slowdown in commencement notices, which fell by 18.5 per cent. “This may have negative implications in the future for completions growth,” the report said.
Goodbody chief economist Dermot O’Leary said the fall-off in completions in Dublin tallies with his firm’s own house-building tracker.
“There has been an increase in unsold stock over the past 12-18 months, led by Dublin,” he said.
Some builders are finding it difficult to get funding for additional building until those unsold inventories are reduced, Mr O’Leary said.
He also noted that while sales in the first-time buyer bracket are strong, there is a clear underperformance at the higher end of the market in Dublin.
“Affordability is certainly biting with binding macroprudential mortgage rules,” Mr O’Leary said.
However, estate agents Savills’ director of research John McCartney took a different view, suggesting the fall-off in completions reflected a pause in commencements prior to a changing of the building regulations in March 2018, which is now washing through the system.
The report also indicates that average monthly rents in Dublin rose by 7.1 per cent to €1,713 in the second quarter, the highest level recorded since the series began in mid-2007.
On the wider Dublin economy, the report identifies Brexit and a slowing global economy as key challenges for Dublin’s growth.
“Brexit continues to cast a shadow of uncertainty over the Dublin economy while slowing global growth and increased global trade tensions are also posing downside risks,” it said.
The report notes that traffic at Dublin Port saw its first annual decline for over six years in the second quarter of 2019. It also pinpoints a slowdown in manufacturing activity.
Despite this, the economy, particularly the labour market, continues to perform well with the Dublin workforce growing in the second quarter. Employment in the capital rose by 11,800 to 717,000.
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