Cairn Homes reports ‘reassuring’ momentum in new home sales amid focus on apartments

Cairn Homes has reported “strong sales momentum” in 2023 to date, with the developer expecting to increase the number of apartments it delivers this year as part of a rise in total new home sales to 1,800.

The Irish home builder saw operating profits rise 76 per cent to €103 million last year, while revenues climbed 46 per cent to €617.4 million as the construction industry recovered from its extended pandemic stoppages.

Profit after tax almost doubled to €81 million in its first full trading year since 2019, up from €43.2 million in 2021.

This year’s expected tally of 1,800 new homes, all of which have full planning permission, follows the closing of a record 1,526 new home sales in 2022, with this figure in turn up from 1,120 sales in 2021.

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Cairn Homes chief executive Michael Stanley said the trend was “reassuring” in light of the need to ease housing shortages and stem the tide of younger workers leaving the State because they cannot find somewhere suitable to live.

The company has “proven” that apartment building is viable, with apartments accounting for about 800 of the homes it delivered last year, he said. This tally “will grow” in 2023, a year in which Cairn Homes expects revenues to exceed €650 million.

With cost-of-living factors and rising interest rates affecting consumer affordability, pricing levels are likely to be “relatively flat” in 2023, Mr Stanley forecast.

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Mr Stanley said 2022 had been “a milestone year” for the company after the period of construction shutdowns, which served to render year-on-year comparisons on its financial performance “completely irrelevant”.

Cairn’s average sales rates exceeded four new homes per week per active selling site in 2022. Some 979 of its sales completions, generating a total revenue of €377 million, took place in an “exceptionally strong” second half of the year, amid high demand that also led to a record forward order book into 2023.

“We have absolutely prioritised reinvestment in our business,” Mr Stanley said.

Cairn reported a total work-in-progress investment of €469.3 million in its 2022 construction activities, with a “strong bias” towards increasing the delivery of apartments.

However, the State continues to face “a critical undersupply of apartments” for social and affordable housing schemes, while there is also a shortage of homes adjacent to areas of high employment.

Mr Stanley quoted Eurostat research showing that, among EU members, the State has the lowest percentage of its population living in apartments, at just 10 per cent compared to an EU average of more than 50 per cent.

“Apartments are not the only solution, but they are a really important solution,” Mr Stanley said, noting that apartment developments tended to be more sustainable, more easily scaled up and more likely to be closer to existing services and centres of employment.

“Unfortunately, for decades Ireland has been allergic to heights and for decades we have seen urban sprawl. The only way to arrest that is to try to make apartment building more viable.”

The Cairn Homes boss was speaking the day after Glenveagh Properties chief executive Stephen Garvey said rising costs and interest rates were deterring investors from backing apartment building, threatening such projects’ viability.

Inflation continues to be a facet of the market, with Cairn reporting build cost inflation of €20,000 per new home built last year, up from €15,000 in 2021. The average selling price, excluding VAT, for starter homes last year was €366,000, up from €350,000. Build cost inflation is expected to moderate to €10,000 this year.

The board of Cairn has proposed a final dividend of 3.1 cent for a full-year dividend of 6.1 cent per ordinary share, subject to shareholder approval.

It also announced a new €40 million share buyback programme, which will commence on March 3rd. This follows a €75 million share buyback programme in October 2022.

The company said it continued to target a 15 per cent return on equity, having achieved 11 per cent in 2022. It has net debt of €149.3 million, up from €109.5 million a year earlier.

Among Cairn Homes’ future construction projects is a major mixed-use development on land in Donnybrook in Dublin, formerly owned by RTÉ. But while the scheme — which comprises a 192-bedroom hotel and 688 apartments — has received planning permission from Dublin City Council, it is the subject of six third-party appeals to An Bord Pleanála.

“We’re not immune to planning challenges as a business. We have a number of sites that have got caught in judicial review and other challenges and we’ll just work through those,” Mr Stanley said.

“What I need to be really clear on, is that every single site we get planning for, we’re waiting at the gates with the bulldozers.”