Irish Residential Construction Activity Contracts for 17th Consecutive Month, Threatening Government’s Home Completion Targets
Irish residential construction activity continued its downward trend for the 17th consecutive month in February, posing a challenge to the Government’s target of increasing home completions by 2.3 percent to 33,450 units this year, a recent survey revealed.
The BNP Paribas Real Estate Ireland construction purchasing managers index for residential activity saw a slight improvement, rising to 49.8 in February from 48.2 in the previous month. However, a reading below 50 indicates a contraction in activity.
John McCarthy, head of research at BNP Paribas Real Estate Ireland, expressed concern over the potential stalling of housing completions in 2024, citing two main reasons for the continued contraction in residential activity.
“Firstly, the acceleration in completions has outstripped the acceleration in commencements, leading to a drag on on-site activity. Secondly, ongoing uncertainty about the economy and construction costs has resulted in a slowdown in home improvement activity,” Mr. McCarthy explained.
Moreover, the recent increase in the European Central Bank’s main lending rate, rising from zero to 4.5 percent over the past 15 months, has added to the challenges faced by the construction sector. However, there is hope as financial markets anticipate a decline to 3.5 percent by year-end.
Despite the current challenges, Mr. McCarthy emphasized that sustained hiring in the homebuilding segment indicates a positive medium-term outlook.
The need for increased homebuilding was highlighted by Feargal O’Rourke, the new chair of IDA Ireland, who stated that annual home completions should reach around 50,000 units to meet underlying demand and maintain Ireland’s attractiveness for foreign direct investment.
While the total construction activity index saw a marginal improvement to 47.4 in February from 45.9 in the previous month, the subindex for commercial activity also showed a slight increase, rising to 47.2 from 44.7. Additionally, the future activity index surged to 64.9 from 58.6, indicating optimism about future construction activity.
