Allied Irish Bank (AIB) says indicators continue to point to a significant downturn in Irish construction activity.

The findings were published as part of the AIB's Housing Market Bulletin for August 2007.

The latest data reveals house guarantee restrictions are down 35% year-on-year for the first seven months of 2007 and the number of commencement notices declined by 22.5% year-on-year in H1 2007.

This marked contraction in activity has yet to be reflected in completions which (on a CSO adjusted basis) were virtually unchanged in the first six months of 2007 compared to H1 2006.

The Bulletin reveals a decline in the number of commencements and registrations in 2007 to date, which points to a significant decline in completions.

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However, given the time lags from registration to commencement to completion there is unlikely to be an equally sharp decline in output levels this year. At this stage, and given the strength of output in the first half of the year, AIB estimates that completions will fall to 80,000 in 2007 (previous forecast 82,500) compared to 88,200 (on a CSO adjusted basis) in 2006, a decline of 9.3%.

The bank says that it is possible that housing market sentiment will improve in the near term and that developers will begin to increase the pace of activity, especially as some of the sharp downturn in registrations to date may have been weather related. It says it should be noted that some industry commentators have a much more favourable outlook on the market.

If the current trend in registrations and commencements continues, then the level of completions in 2008 will fall well below the 70,000 level that the AIB forecast previously. The report says there is nothing at present to suggest that sentiment towards the housing market is improving.

AIB expects a further contraction in the level of house building activity in the coming months.

(LC/SP)