Abbey: 40,000 houses per year is unrealistic

CÈO Charles Gallagher said increasing annual new housing output, from current levels of around 19,000, up to 25,000 is a realistic target for the next couple of years and would be sustainable.

“I’m not sure 40,000 is a long-term sustainable level for the industry; but it’s not a huge concern as we’re nowhere near it. I think we should try to get up to around 25,000 [new houses per year] and then see where we go next; maybe up to 30,000. In order for 40,000 to be realistic the supply chain and labour base would need to be built up and there would need to be the confidence that that sort of level of output could be maintained for some time. We need steady growth,” he said.

While the likes of estate agent Savills and economic think-tank the ESRI have recently said that housing supply should balance out by 2021, the generally accepted target of 30,000-40,000 new builds per year needed to make that happen is unlikely to materialise, according to construction firms like Abbey and Sisk. The latter recently said a widespread freeing up of public land, by the Government, is immediately necessary to meet demand.

Mr Gallagher said Abbey is “very very focused” on increasing its Irish activity, with upping the number of houses it is building here being its “top priority”.

He said the company is actively looking for more sites, with it having €78.9m in cash as of the end of its latest financial year. It has one development under construction in Navan and one nearby due to start work later this year. Abbey is also due to lodge a planning application for a 70-80 unit site in west Dublin in the near future. Sites in Dublin, Meath and Waterford were added to Abbey’s landbank last year and it is “well advanced” on resuming developments at sites it holds in Laois.

The company completed 75 house sales in Ireland in its last financial year, up from 39 the previous year. In the UK - where it generates around 80% of its revenues - Abbey built 524 houses, up from 495 previously.

Mr Gallagher - who also described the Central Bank’s mortgage lending rules as being “moderately too tight” - said that he is confident that continued house price growth will spur more companies to build homes outside of the Greater Dublin area.

Abbey’s share price remained unmoved despite the company reporting a near 8% fall in pre-tax profits - for the 12 months to the end of April - to €58.6m. It had previously flagged the likelihood of smaller profits, due to lower margins. Mr Gallagher said that turnover is likely to rise this year - it rose modestly to €218.5m last year - but could be eroded by margins, which are still under pressure.

While down, Abbey’s profits were still well ahead of Davy’s estimates of €50.1m.

“The group is currently on course for another satisfactory year,” said Mr Gallagher, adding that activity growth is expected across its three regions of Ireland, Britain and the Czech Republic.

“The group, backed by its strong balance sheet, will continue to invest to meet the need for new homes in all its markets,” he said, but warned that the final outcome of Brexit could hinder progress in its British and Irish operations.