Interest rates are rising to hit first-time buyers, Cairn Homes chief warns

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Looming interest rate hikes pose a challenge for families hoping to buy their first home, Michael Stanley, chief executive of builder Cairn Homes, warned Thursday.

Homebuilder Cairn is on track to make a profit of 100 million euros this year from the sale of 1,600 homes, of which around 1,300 have already been agreed, according to the company.

Speaking after his annual general meeting in Dublin, Mr Stanley acknowledged that the prospect of a likely rise in interest rates and more expensive mortgages worried Cairn.

“If interest rates go up, that’s a challenge for our customers,” he said. Mr Stanley pointed out that the big problem for the company was to continue to build houses at affordable prices for average earners.

The listed company builds homes in Dublin and other centers primarily for first-time buyers.

European central bankers, including Republique’s Gabriel Makhlouf, signaled this week that they could start raising interest rates in July.

Such a move would increase mortgage charges alongside what Cairn predicts will be a likely 6% increase in home building costs this year.

Mr Stanley calculated that construction inflation, which began in 2021, combined with “necessary” regulatory changes, has added up to 25% to the cost of building a new home since 2015.

The Cairn trade statement noted that infrastructure, material and labor costs are all rising.

The company hopes to offset increases in labor and general costs by improving efficiency.

‘Uncertain’

Its statement describes the outlook for construction inflation as “uncertain”, predicting that it will remain elevated in the coming months as suppliers react to energy price volatility.

Cairn is committed to working with these companies to achieve competitive pricing while ensuring security of supply.

Demand for new homes in the first weeks of this year was the “strongest” Cairn has seen to date, the company said.

He estimates that the net income from the 1,600 homes he plans to sell this year would be more than 600 million euros.

Mr Stanley argued that the prices of new homes were not rising as fast as those of second-hand properties.

Cairn has sold apartment buildings built in recent years to investors who intended to let the houses.

Its chief executive said he was in talks with state agencies, including the Land Development Agency and the housing association Tuath, about building social and affordable housing.

He suggested that this could take an increased share of the company’s business in the future.

That would be more than the 20% the law requires private developers to set aside for social and affordable housing, he added.

Institutional investors

However, Mr Stanley stressed that more than half of Cairn’s business would remain focused on first-time buyers, while it would continue to deal with institutional investors seeking apartment developments.

He argued that proposals, in local council development plans in Dublin and elsewhere, to limit new build-to-let projects were based on faulty census figures.

“If local politicians, voted in by people who already own homes, want to continue setting targets, which are unrealistic, it will have an impact on the delivery of homes in Ireland,” Mr Stanley warned.

Cairn raised salaries in line with expected increases in the cost of living, according to its statement. It also doubled participation in its long-term incentive program at all levels of the company.

The company plans to return 115 million euros to investors in the form of ordinary dividends and share buybacks this year.

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