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The end of the boom


Property developers, builders and tradesmen are among those worst-hit by the slowdown, but how bad will it get?


The Interview
Neill O'Neill


FORGET the weather; the main topic of conversation these days is the economy and the dread of recession that surrounds it. And, unlike the unseasonable Irish climate, there is reason to have concern about recent economic developments in Ireland and the world, with cut-backs in Government and retail spending, and rises in fuel and energy costs continuing.
One sector where the changing conditions have been very obvious is the construction industry, which is expected to experience some of the most adverse effects of the ongoing economic downturn. However, financial institutions and those who remain hopeful that tumbling stock markets will find reverse gear are also finding themselves in unenviable positions, and many feel that an intrinsic link between these, or rather the breakdown of this link, is further compounding an already precarious situation in the Irish construction industry.
In conversations with Mayo-based property developers, smaller scale builders and others whose businesses are directly dependant on local construction and property markets remaining buoyant, the changed attitude of banks is singled out as the major contributory factor to the slowdown. The fact that banks are no longer approving 100 per cent mortgages, and are being much more selective in who they lend to, is preventing people from raising the finance they need to buy a house and is hindering potential buyers hoping to benefit from reduced house prices. All of this is, in turn, contributing to market stagnation.
Evidence also exists that lay-offs in the construction industry in Mayo are imminent, and while some will say that talk of a ‘Black Friday’ looming may be an over-dramatisation of the facts, one fact is undeniable: as the building industry stagnates overheads must be cut and wages will be the first aspect of these to be trimmed back.
The SIPTU branch in Castlebar is reporting more than the normal level of inquiries about redundancies from both members and non-members in the construction sector.
“While this is generally the time that contractors would lay people off, we are getting a lot more queries from people who have been told that there is no work after the holidays,” said Martina Weir, Assistant Branch Organiser at SIPTU’s Castlebar office.
“We get these queries before the holidays every year and the reality is that some people won’t be returning to work in the construction sector after the holidays. Some of these lay-offs will be for a few weeks until work comes around again, but some will be more permanent.”
Martina added that it is impossible to say how many lay-offs are likely to occur, but those involved in house-building, and to a much lesser extent those employed by contractors who are involved in public-funded jobs, will be worst hit. She also stated that this area could hold the key to a building renaissance in the future.
“Within SIPTU we have economists’ views on this supposed recession and what they are saying regarding construction is not all doom and gloom,” she said. “Their views are that if money continues to go into public works the situation might not get much worse. However, if it is taken out of public works – such as roads, schools, hospitals etc – the very foundation on which the construction industry is now sitting may flounder,  and it may not be in a position to propel itself upwards once again.” 
County-wide, developers have most major projects on hold, and have adopted an approach of not embarking on more building until their current housing stock sells. As a direct result of this, local suppliers have witnessed demand for their products drop off. One builders’ providers told The Mayo News that they expect business to be down by 20 per cent at year’s end, while some suppliers of bulkier materials, such as concrete, are bracing themselves for an even larger blow.
Building only as the market dictates should see the housing surplus reduced, but sales have slowed very considerably and one Mayo-based auctioneer estimates that showings are down by two thirds, while sales have fallen just as dramatically. House prices in Westport have dropped by around five per cent but a consensus exists that, apart from the credit crunch, potential buyers are waiting for further price drops before making any purchases, in what is perceived to be a market that has not yet hit its trough.
In Westport in 2008, the absence of a single major development commencing for the first time in years has stunted the market for the products of local suppliers. As a result, ground-works’ contractors, tradesmen of all varieties and suppliers are looking towards smaller jobs, commercial work and moving further afield to maintain employment. Some developers have taken the step of dividing up their sites and selling individual holdings with planning permission and even foundations laid – while London is also hailed as a hope for many, given all the work that must be done there in advance of the Olympics in 2012.
While one-off housing is still going on – and keeping builders’ yards and suppliers in work – farm work is now consuming half the supply of one concrete yard in the county, which has almost a dozen trucks on the road. The proprietor of this business said that once the summer and the farming grants are over he expects his productivity to drop – and to be down by 50 per cent by the end of the year. While remaining optimistic, he also warned that people will have to play a waiting game across the construction sector, and that things could well get worse before they get better.
“We’re going to smell the eighties again,” he said, ” but we’re not going back there.”

Slowing down, moving on

CASE STUDY
TOM is a plumber. He lives in Mayo with his wife and two young children, but is now reconsidering his future.
“There has been a big slowdown since the start of the year in my line of work but it has been noticeable since last year when house prices began to level off. There has always been a lot of plumbers but work has dried up and nobody is building now because nothing is selling.
“I have been looking for jobs around the county and in Castlebar, for example, I went into Tesco and Aldi looking for warehouse or other work but they had nothing. I wouldn’t have minded cleaning or stocking shelves if the money was okay. It’s better than going six months without getting a penny in.
“Now I don’t see that I have many options so my wife and I are looking into making a permanent move to Australia. The kids aren’t in school yet so it won’t affect them too much and I have friends out there who tell me work is good and so is the money. A bit of sunshine will be no harm either. We have looked into visas and it costs a couple of thousand, but there is a new scheme starting in September which will make it easier to move there, and we were told that we’d have no problem securing them.
“I’m not talking about a short-term move, more like 25 years or who knows, maybe longer. If work was plentiful I’d be staying put. I expect that in a few months time it will be even more scarce and credit lines are getting longer and others have been dropping prices just to remain in work, to a point where work is barely profitable.
“Hopefully this time next year I’ll be over in Sydney or Melbourne or somewhere.”

Names and details have been changed to protect identity