Construction slowdown for fourth month in a row as ‘subdued market conditions’ blamed for home-building lull

ECB president Christine Lagarde says there are more interest rate rises to come. Photo: Kai Pfaffenbach/Reuters

Sarah Collins

Home-building activity fell for the fourth month in a row in January as firms contend with a slowing economy.

Commercial activity and civil engineering also fell, according to BNP Paribas Real Estate Ireland’s construction purchasing managers index (PMI), although the dip in all three sectors was, on average, smaller than previous months.

The headline index came in at 47.7 in January, a fourth consecutive month of decline, but higher than December, when it was 43.2. Any reading below 50 indicates a contraction.

Construction managers cited “subdued market conditions” as a reason for the drop in output and demand, as they lowered input buying for the eighth month in a row.

But builders are more upbeat about the future, with 85pc expecting to be as busy or busier in one year’s time.

Irish building firms also added to their workforces for the first time in three months, while supply pressures eased and the rate of input cost inflation slowed to a two-year low. However, subcontractor rates increased markedly.

“Construction slowed slightly in January, but this month’s PMI is distinctly more upbeat than those of recent months,” said John McCartney, director and head of research at BNP Paribas Real Estate Ireland. “Although input costs are still rising, the rate of increase is at its slowest for two years. Meanwhile, supply chain delays have eased somewhat, perhaps reflecting the reopening of the Chinese economy. Moreover there are positive signs for the year ahead.”

Mr McCartney said relaxed mortgage rules, increased price caps in the Government’s shared equity scheme, the new renter’s tax credit and better social housing support will help builders and households in the year ahead.

The Government exceeded its house-building targets last year, but experts have cast doubt on whether it can complete the 29,000 it has pledged in its Housing for All plan this year.

Central Statistics Office data shows 29,851 new dwellings were completed last year, up 45.2pc on 2021. But completions fell slightly (2.8pc) between October and December last year, compared to the previous three months.

Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers (IPAV), pointed to a “disappointing” fall in the number of commencement notices recorded by the Housing Agency, an early indication of falling activity in the market.

In December, there were 1,795 commencement notices registered, down from 2,402 in November and only slightly above December 2021 levels – a time when the economy was in a partial lockdown.

Nama last week cast doubt on its ability to deliver some of its promised new homes because of rising interest rates and infrastructure and planning challenges.

The European Central Bank (ECB) raised interest rates in February by 0.5pc, promising another half-point hike in March. ECB president Christine Lagarde has hinted rates could go even higher after that, if inflation does not come closer to its 2pc target.

IPAV’s Pat Davitt said the level of demand from consumers is keeping house prices elevated and will continue to do so in the year ahead.

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