According to AIB's November housing Market Bulletin there are no signs of a let up in the downturn in housing market activity. However output is adjusting towards sustainable demands.

Housing registrations fell by 57 per cent in October and are now down by 41.5 per cent year-to-date. Meanwhile, commencements have also been weak, falling by 50 per cent year-on-year in Q3, leaving them down by per cent year-on-year in the first nine months of the year.

Due to the lags from registration to commencement to completion, this decline is only now beginning to be reflected in completion levels. Completions (on a CSO adjusted basis) were broadly flat compared to 2006 levels in the first half of the year. However, in the third quarter this year they declined by almost 23 per cent year-on-year, leaving them down by 8.2 per cent for the year to September.

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The report stated that while output is undoubtedly rapidly adjusting downwards, the good news for the housing market is that this should serve to restore the supply/demand balance, with the number of completions dropping back to a level comparable to medium term sustainable demand, which we see as around 50-60,000 units per annum. Indeed, if sentiment towards the housing markets does not improve in the coming months, developers are likely to further curtail activity and the annual rate of completions could then fall below this medium term sustainable demand level. This would help to remove any supply overhang that might at that stage be in the market, setting the stage for an eventual recovery in house prices.

(GK/JM)