A report from Davy Stockbrokers has said house building in Ireland must drop to a more sustainable level, and that employment growth is likely to fall to 1.5% when this happens as a result of lower levels of activity.
The report points out that building now accounts for 12% of employment in the economy, and takes a greater share of jobs and spending that in other developed countries.
Economist Rossa White also says that more than 40% of houses built in the past two years are lying vacant as second homes, holiday homes or unlet investment properties, adding that this rate must fall to nearer 10%.
He says house building is nearing a peak, and non-residential building will not recover enough to compensate for the consequent drop in employment. In a worst-case scenario, jobs growth could fall to 0.3% in the event of a sharp one-year downturn, but the report says a more gradual slowdown is more likely.
The economist projects that such a slowdown would knock one point off economic growth in 2006 and 2007, though this would still leave annual GNP growth of almost 4%.
77,000 houses were built last year, but the Davy report says 55,000 a year would be more sustainable.
* However, a report from estate agents Hooke & MacDonald says that current level of residential construction at the very least need to be maintained over the next five years in order to meet the required demand.
'The economy is becoming increasingly reliant on migrant workers to fulfil the labour requirements of Irish employers. With net inward migration now averaging close to 50,000 per annum, it is critical the appropriate physical and social infrastructure is in place to accommodate the growth in population,' comments Geoff Tucker, Economist with Hooke & MacDonald.
'This includes delivering at least 80,000 new homes each year over the next five years to meet demand,' he said.
Hooke & MacDonald expect a further 80,000 new homes will be required and built in 2005, up from 77,000 last year. The company says that this level of construction activity has the potential to be at least sustained over the next five years, with new home construction potentially reaching 85,000 units a year.
The estate agents say that Ireland still has fewer dwellings per 1,000 inhabitants than most other EU countries and has some way to go to catch-up. 'Ireland needs more new homes and especially more new apartments,' Mr Tucker said.
