Slowing of Building Development

The rate of development in Ireland’s construction sector has slowed to an all time low in June spanning across the last 8 months. Although the rate of expansion is declining, the construction sector remains at a solid growth rate.

The declining growth was caused by the weaker activity in the civil an commercial segments. This contrasts the housebuilding sector that according to the Ulster Bank Construction Purchasing Managers’ Index displays signs of constant and strong expansion.

The construction index amounted to 53.1 for the month of June, 2019. This number decreased from May amounting to 54.9. The index defines that any number above 50 indicates expansion in the construction sector. Any readings below 50 indicate contraction.

Simon Barry, Ulster Bank’s chief economist for the Republic of Ireland, claimed that although commercial activity is still expanding, the decline in pace of expansion in June reached the weakest expansion rate in six years. This trend of declining construction expansion rates denotes that the housing crisis is far from being solved. The amount of construction needed to meet demand falls far below current rates of completed developments.

The residential sector has continued to strongly preform while the pace of housing activity growth remains at steady solid paces. These trends depict signs of sustained and welcomed expansion. The strong pace of increased activity in the housing sector does not translate to supplying sufficient housing units to meet growing demands. Goodbody Stockbrokers revealed that housing completions in the first quarter of 2019 rose by 22%. If this trend were to continue then the country would be on target to have 22,000 additional completed units by the end of the year.

However, completed units must reach 35,000 by the end of the year to keep up with demands of the market. Ulster Bank Construction Purchasing Managers’ Index also depicts that there remains an increasingly strong demand for construction workers. Reports of employment in June within the construction sector rose for the eighth consecutive month.

A massive problem in regard to housing remains even though the construction sector remains booming. Supply targets according to Rebuilding Ireland are being meet by building new homes amounting to 25,000 new housing units per year by 2020. However, the current trends in supply of housing of completed units indicate that the rate of increase in construction are decline. This may suggest that Rebuilding Ireland’s targeted goal of 25,000 completed additional units in 2020 may not be reached.

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