Planning figure shows property slowdown

Official figures show a sharp drop in the number of planning permissions granted for new homes in the last three months of 2006.

The Central Statistics Office said 16,251 permissions were given. 13,054 were for houses - a fall of 21.4% - while apartments were down 30.4% at 3,197.

The figure for the whole of 2006 was down slightly to 19,288, the first yearly drop since 2002.

The Irish Home Builders' Association blamed a failure to service residentially zoned land and planning delays for the drop, and warned that it could lead to shortage of supply, particularly in Dublin.

Earlier, a report from Bank of Ireland said the housing market was cooling after reaching a peak in 2006.

According to the bank's quarterly analysis, house prices will rise by 3% this year, with an upper limit forecast of 4%, and house completions may exceed 80,000 - a fall from the bank's previous estimate of 85,000.

The bank said that prices rose by 0.3% in the three months to January. However, the annual change was over 10%, with Dublin prices up 1% over the three months, and 14.7% in the year.

The report forecasts gross mortgage lending for house purchases again to be around €25 billion, and the growth in the level of outstanding mortgage debt to rise by around 20%.

Dan McLaughlin, BoI economist, said private sector rents rose by more than 10% in the year to February, which implies that overall demand for housing remains strong.

He said that expectations of a reduction in stamp duty may be a factor in persuading some people to postpone purchase, with affordability a more fundamental reason to delay house buying. He said affordability is expected to deteriorate further into 2007 and 2008.

The bank said the commercial property market performed in line with forecasts for last year, with the return of 27.2%. However, it added the cycle of growth has peaked in this market also, and it expects a 12% return this year.