Another year, another 12 months of record housing output in Ireland.
AIB Global Treasury estimates house completions totalled about 80,000 in 2004, a figure it says could be repeated this year. Department of the Environment statistics show house completions in the first half of 2004 rose by 21% year-on-year, following on from a record 68,819 in 2003.
However, AIB’s recent report on the housing market predicted there were “high risks”, with price inflation relatively high, a surge in supply, and substantial reliance on the investment market. But it believes a soft landing is possible due to comfortable affordability levels, low interest rates, an improved economic climate, a robust labour market and untapped demand.
AIB expects supply to moderate during 2005 but said further signs of a downturn in housing registrations are needed. It predicts house prices may rise by about 3-5% in 2005.
On a more general note, the economy is predicted to grow by around 5% in 2005, with inflation up by around 2.5%. AIB says strong job growth and low unemployment are expected to continue and public finance looks set to remain in good shape. “While it may not match the feats of the Celtic Tiger era, it is still pretty close to economic nirvana,” AIB said.
Capital expenditure is projected to go up from €6.6bn in 2004 to €8.2bn in 2005, an increase of 23.9%.
On the sawmilling front, one contact said his company had “a reasonably good start to the year and the end of the year went reasonably well”.
Construction timber
From a supply point of view, he said there are “never enough” large construction logs but he believes mills are trying to be sensible by keeping prices down.
He said there is trade talk of softwood price increases due to timber shortages in the Baltics, and also rumours that Scandinavian suppliers may increase their prices this year.
Another sawmiller added: “We hope to see price increases in construction timber because our margins are being continually eroded.” He attributed this partly to increased transport costs. He said timber had a buoyant time in 2004 because construction had a good year. Demand for sawmill residues is “very high” but packaging is quite static. He also reported tight supply for construction logs.
Coillte said there was very little difference between 2003 and 2004 in terms of its log volumes offered at auction and sold. Provisional figures for the year show 2.1 million m3 offered at auctions (both harvested and standing), of which 92% was sold, compared to 2.16 million m3 offered in 2003, of which 94% was sold.
In the main 14cm-plus sawlog category, overall invoiced sales in 2004 (including pulp and fencing/pallet wood), were 2.656 million m3, compared to 2.659 million m3 in 2003.
But Coillte says the amount of sold logs actually taken into the sawmills for the year was 3% higher than 2003.
Prices were down about 9% in all categories for standing timber, whereas harvested prices were down 5%.
A Coillte spokesperson said log sales had been slow during early 2004 because of increased prices, a high level of imports and the fact that a large volume of logs was sold at the end of 2003, but not taken into the mills until 2004.
Meanwhile, in the merchanting sector, one source described sales of construction timber as “excellent” through December but Christmas-related products had been flat because of a proliferation of companies offering similar products.
He said the price of sawn timber rose by €2/m3 towards the end of 2004, which he described as “negligible”.
“So far it has been a tremendous start to the year, sales have been extremely buoyant.”
Housing growth
He said there is concern among merchants and builders that if housing completions again topped 80,000 in 2005 the growth would not be sustainable. On the good news front, he doubted that timber freight rates would rise.
Another merchant, who agreed that freight rate increases were being over-egged, said the spring would yield a clearer picture of the housing market.
The rise of timber frame remains a concern for importers, while some queries have been made about Russian timber specifications.
One panel agent said despite MDF sales volumes being up, prices were still depressed and returns “appalling”. “The MDF business in Ireland has been quite good without any yield,” he said.
There were several price increases during 2004, but they were offset by higher costs for resin, energy and transport. The construction and shopfitting sectors have boosted MDF use and the agent described prospects as “more upbeat” for 2005, with further price rises a possibility.
Meanwhile, industry experts reckon wood biomass offers Ireland huge benefits, with the ability to redirect more than €1bn to the Irish economy and create around 4,000 jobs.
