The Covid Punch and Judy Show
You can open, no you can’t, you can open, no you can’t, it is like watching a Punch and Judy show from one Minister announcing construction can go back on 5 March only for NPHET or more senior Ministers to pipe up and say no you can’t. No matter what form of media you read or listen to this is the loop that occupies us daily.
At this stage the Government’s flip flop nature in making decisions is exasperating and not just for the construction sector but for all business sectors, education and sports. Someone in this government needs to grow a pair and stand up and be counted, we either are opening or we are staying in lockdown, if that is the decision that would be fine but the drip feed of useless conflicting information is just causing high levels of uncertainty. What we all need at this stage is a date whether it is now or 1 April or May it doesn’t matter but have a definitive date by sector that gives some hope and certainty, those in power need to realise the issue of uncertainty is creating a negative impact that will have long-term ramifications.
Housing being one of those ramifications, Minister Darragh O’Brien is very anxious to get house building restarted and who would blame him, at a time of housing crisis the lockdown could be costing 700-800 house completions a week according to Government estimations. In 2019 we completed 21,087 homes according to the *CSO New Dwelling Completions report, 2020 house completions were 20,676 down -1.9%. The final figure is quite astounding and the construction industry should be applauded for hitting that number. Why? In Q1 2020 housing completions were up 732 a 17.2% increase on 2019 this was when life was normal. Q2 was a -1,539 or -31.9% drop this is due to level 5 lockdown and it felt like the apocalypse had arrived. A lesser reduction in Q3 of -534 a -9.4% drop as construction was allowed back to work under constrained circumstances, it also took some time to ramp back up. Q4 completions were up 1,016 on 2019 a +15.9% increase which was a total of 7,400 house completions for that period. This is a phenomenal turnaround by the industry in such trying circumstances.
However, a protracted level 5 lockdown now looks likely to be in place until the end of March beginning of April due to NPHET advice, the impact will be c. 8,400 to 9,600 less completions for 2021. This is a number that cannot be pulled back once construction is given the go ahead to return, even for an industry that can and will hit the ground running.
If we are down by c. 8,000 completions this will bring us back to 2015 / 2016 figures. The ‘Rebuilding Ireland Action Plan’ in 2016 set out an overall target to increase the supply of housing to 25,000 per annum by 2021, 15,000 in 2016, 18,500 in 2017 and 20,000 to 21,000 in 2018, this was coming from what was considered a low base of 12,666 units in 2015, unfortunately the figure of 12,666 was well overestimated and the actual completion figures were closer to 6,000+ units. The problem with the overestimated completion figures means that the then requirement to get to 25,000 (that figure is probably closer to 36,000) homes per annum is way too low and according to the Central Bank Economic letter by Thomas Conefrey and David Staunton “will continue to contribute ongoing imbalances in Ireland’s residential property market.” In essence we already had a housing lag which is now further exacerbated by this lockdown and is going to be impossible to correct. David McWilliams argues in the Irish Times 13 February that we need to build 60,000 per annum to keep up with demand so we are way off the mark.
While the immediate need of public safety is paramount it must be argued that the construction industry has an excellent track record in managing COVID-19 on sites. In order to mitigate the further damage being caused by the pandemic on the housing crisis we need to get the industry back to work, if other European countries can do it there is no reason why Ireland should not.
Article prepared by: Colm McGrath, MD, Surety Bonds.
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