Residential construction activity continued to fall last month as cost pressures weighed on the market despite strong demand for properties.
nd BNP Paribas Real Estate Ireland has warned that given Ireland’s strong population growth, housing output must remain robust.
John McCartney, director and head of research at BNP Paribas Real Estate Ireland, pointed out that housing activity fell for the third straight month in August.
The company’s latest Construction Purchasing Managers’ Index (PMI), released this morning, shows construction in the residential, commercial and civil sectors has continued to contract over the past month, albeit at a slower pace than in July.
“Price signals from the selling and particularly the rental market point to a persistent undersupply,” Mr McCartney said of the housing market.
“We believe that 28,000 new homes can be delivered this year,” he added. “However, given the strong reacceleration in population growth, the positive trend in residential construction output must continue.”
BNP Paribas’ latest PMI shows that new construction orders fell again in August, while inflationary pressures remained pronounced.
The index stood at 46.9 in August versus 41.8 in July. Any number below 50 is contraction and any number above is expansion. The index is based on a survey of around 150 construction companies.
Figures from the Central Statistics Office last week showed that construction and construction activity in Ireland fell 4.5 percent in the second quarter of the year.
It found that output in the home construction market fell 2.9 percent between the first and second quarters.
And while construction activity fell nearly 10 percent between the second quarter of 2019 and the second quarter of this year, the value of construction rose by 8.5 percent over the same period.
Input prices for everything from cement to insulation were already rising before the energy crisis sparked by Russia’s invasion of Ukraine.
According to respondents to this morning’s latest BNP Paribas survey, the decline in overall construction activity over the past month reflected the “impact of strong price hikes”.
“Inflationary pressures impacted not only construction activity but also the ability of firms to win new business,” the report said. “Some companies reported that inquiries had dropped, leading to another sharp drop in new business. The most recent decline was the fifth in as many months and broadly similar to June and July.”
The report also notes that construction firms reduced their upfront purchases in August, but headcount increased slightly.
“Two factors have determined the trajectory of construction activity over the last year,” said Mr. McCartney.
“Activity picked up sharply last summer as Covid restrictions were lifted and deadlocked projects were given the green light to resume. However, rising construction inflation and heightened macroeconomic uncertainty have since started to pull in the other direction,” he added.
https://www.independent.ie/business/irish/housing-activity-falls-again-amid-cost-woes-41980581.html Housing construction activity is falling again in view of the cost problems