An article by Fearghal O’Connor in the Sunday Independent reported that many developers and contractors in Ireland fear housing supply will dry up as new builds remain unsold. According to the piece, several of the country’s most active house builders met up and they all nearly had one observation in common when sharing their thoughts, that was, a distinct slowdown in the time it takes to sell an average family home in Ireland. Queues of prospective buyers became something of a norm in recent years as people desperately fought to get on the property ladder and escape the rental sector but now news from the home builders is that queues are dwindling. This comes in the same week as a new study from the Central Bank, which found that 34,000 new dwellings will be needed each year for the next decade to keep up with demand.
With the increase in population and more and more people coming to Ireland to settle down with their families, demand for housing has been consistent, yet many home builders are experiencing a slowdown. According to RTE news, the study from the Central Bank found that in order for housing to have kept up with the growth in the population, around 27,000 dwellings per year would have had to be built in the past eight years from 2011 until 2019. Interestingly, the average housing completion rate for this period was just 10,500 dwellings per year. Furthermore, the Central Bank study shows that from the years 2006 to 2011, the overall population grew by 348,000 with 122,000 or just over a third from net inward migration. The current population of Ireland stands at 4.922 million.
Ireland’s long-term housing demand should continue to grow considering the population of Ireland is expected to reach 6 million people by 2051 (as projected by the CSO). Ireland’s population is growing and the demand for housing remains buoyant and strong. First-time buyers face challenges but the continuation of the Help-to-Buy scheme, which was officially announced two months ago, is welcome news. Acquiring a mortgage and saving for a deposit is difficult for first-time buyers who may paying high rents (as rent in Ireland has reached record highs). According to daft.ie, rent prices around the country rose by an average 5.2% to €1,403 over the past 12 months. The average rent in Dublin at the moment is €2,044 (up 3.9%), while Cork continues to have the second highest rents in the country at €1,372 per month (up 5.5%). Last week the Central Bank opted not to change the mortgage lending rules. The Central Bank resisted the pressure to change or relax the rules on the basis that it is in the best interests of the wider economy not to change them. In effect, this means that mortgage applicants will continue to be limited to borrowing 3.5 times their salary, and will require between 10% to 20% cash deposit (with a small number of exceptions).
While certainty is welcome, this was not the decision many in the construction industry wanted the Central Bank to take. At a recent industry event, one of Ireland’s most prolific developers Michael O’Flynn (Chainman and CEO of the O’Flynn Group) noted that while demand might be strong at 30,000 to 35,000 new homes needed annually, in reality only about 20,000 people can access a mortgage due to the restrictive macro-prudential rules mentioned above.