Housing output has rebounded somewhat after construction sites re-opened in May, but completions still fell 33% overall in Q2 – the largest annual decline in housebuilding in eight years.
According to Goodbody Analytics BER Housebuilding Tracker, there were 3,240 housing completions in Q2 – a significant drop on 2019, but better than originally expected during the lockdown. We still expect housing completions to fall substantially this year (-20% year on year) but are revising up our estimate to 16.5K (from 14K). For 2021, we now expect 19.5K completions (previously 16K), so a housebuilding rebound is on the way for next year.
Given the lockdown restrictions that were in place from the end of March until 18 May, it is important to look at the trends within the quarter. Unsurprisingly, housing completions, as measured by BER certificates issued, fell sharpest in April (-60% relative to the Q1 monthly average) during the full lockdown. In June, BER certs were only 9% below the Q1 average. This is a similar trajectory to the UK, where the number of Energy Performance Certificates (EPCs) issued fell by 60% in April but were down by just 14% in June and up by 1% in July.
Dublin had the largest decline in housing output in Q2, down 48% year on year, but large-scale declines occurred countrywide. Scheme completions fell by 37%, apartments by 35%, while single properties outperformed, falling by 24%.
Housing starts fall at a faster pace - 46% year on year in Q2 - with the largest decline in Dublin’s commuter counties (Mid-East, -68%). This indicates that builders are focusing on completing existing sites and suggests that the pandemic will have longer-lasting impacts on output levels beyond 2020, therefore meeting estimated demand levels of c.35K will take even longer than previously forecast.
Meanwhile, new home sales fell 40% in Q2, with larger developers seeing greater declines. Our analysis of the Property Price Register (PPR) confirms that sales of new homes fell sharply across the country in Q2, with the most acute weakness in May, followed by a modest recovery in June. For Q2 overall, new home sales fell by 40% year on year.
Finally, the decline in mortgage drawdowns in Q2 was not as bad as feared, but approvals continue to be weak, suggesting that the full impact on the market is yet to be seen. Mortgage drawdowns fell by 35% year on year in Q2. While this is clearly a large decline, it must be seen in the context of an economy that was effectively in lockdown for most the period. All categories of lending fell substantially during Q2. However, most of the mortgages drawn down in Q2 would have been approved prior to the pandemic, as well.
Mortgage approvals have fallen by a greater extent than mortgage drawdowns – at 58% versus the same period last year - suggesting that the impacts of the pandemic will continue to linger in the coming months.
