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dierk schaefer

New home building across Ireland has pulled into the slow lane

But land values are predicted to rise, which could mean more property eventually on the market.

Updated 10.30

GROWTH IN THE Irish construction sector has hit a slowdown.

Total construction activity fell for the fourth successive month in a row, according to the Ulster Bank Construction Purchasing Managers Index.

Growth rates fell sharply during February. This was evident in terms of activity, new orders and employment. Sentiment, which is used to measure firms’ predictions for future work, eased to the lowest since October 2013.

February’s sharp drop is the weakest in the current 18-month sequence of growth.

Comparing rates with the same period the previous year, there has been a slowdown in the housing, commercial and civil engineering sectors.

Housing activity fell back this month to 50.1 from 54.4 in January 2015. Commercial activity fell from 61.6 in January to 54.6 last month, while civil engineering activity fell from 54.5 to 49.3.

Any figure above 50 represents growth, while a rating below that number indicates a decline.

“The key feature of the February results is another sharp drop in the index which indicates that the pace of growth eased significantly last month,” said Simon Barry, chief economist at Ulster Bank.

He said the survey paints a “disappointing picture”.

Construction Industry Starts Again Sam Boal / Photocall Ireland Sam Boal / Photocall Ireland / Photocall Ireland

Stagnation in building

The stagnation of housing last month is a stark contrast from the record rates of expansion recorded as recently as September of last year.

It could be that some of this weakness is linked to higher levels of uncertainty surrounding the housing market outlook related to the recently-introduced Central Bank mortgage lending regulations.  However, the weakness emerging in the past couple of months has extended beyond housing.”

However, he said that activity has also fallen back materially in both commercial and civil engineering sectors, which are not directly affected by the Central Bank measures.

He said this points to more broadly-based weakness.

While Irish construction remains in recovery mode, it is clear that the sector’s recovery dynamic has weakened considerably in the early part of this year.”

File Photo The Central Bank last night announced the new rules, which will require higher deposits from prospective homebuyers. Under the plan, banks will only be able to lend up to a maximum of 80% of a propertys value. However, there will be an excepti Sam Boal / Photocall Ireland Sam Boal / Photocall Ireland / Photocall Ireland

Land values to keep rising

In more bad news for those looking for affordable homes, property agency Savills has predicted land values will keep rising this year “and beyond”.

But the company’s research director, John McCartney, said the increase in prices should lead to more vacant sites being released on the market this year and an eventual rise in construction.

Savills said Dublin would remain a “focal point” for land sales, however regional cities like Cork, Limerick and Galway, and commuter counties around Dublin were also likely to see increased activity.

The government has flagged putting new taxes on vacant property to discourage landholders from sitting on big land banks in the hope of future price rises.

Additional reporting Peter Bodkin

First published 6.20am

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