Real estate activity is recovering strongly but faces headwinds in terms of costs and accessibility
THE latest Housing Market Monitor Q4 2020 published by Banking & Payments Federation Ireland (BPFI) shows that real estate activity recovered strongly in early 2021 despite public health measures that shut down much of the residential construction, but it could take at least until 2024 before the offer closes. to answer the question.
Providing his analysis of the housing market, Brian Hayes, Managing Director of BPFI said home deliveries in the first quarter of 2021 were only 7% lower than in 2019 and 14% higher than in 2018. The Start-up activity accelerated sharply in April and this, combined with the more than 5,600 units that were started in 2019 but were not completed in 2020, are expected to fuel housing production in 2021 and 2022.
However, commenting on BPFI’s latest market assessment, Mr Hayes said the pandemic has had a significant negative impact on housing production: “We expect the total number of housing completions to be at least similar at levels observed in 2020, around 21,000 units. Prior to the pandemic, we predicted that annual housing completions would reach 30,000 units by the end of 2022, however, it is clear that we will not reach this level of production until at least the end of 2024. ”Pressures Rising costs and affordability issues Mr. Hayes explains that if the supply increases, the mismatch between supply and demand could contribute to an accumulation of latent demand in the years to come.
“The mismatch between current demand, as well as pent-up demand, and the supply of new homes appears to have brought average selling prices relatively close to the peak of the previous cycle in 2007 in terms of selling prices. As the gap between current demand and supply narrowed before the pandemic, the delayed supply response creates latent demand for years to come. A separate analysis of Eurostat survey data, combined with loan data from BPFI, the Department of Housing, Local Government and Heritage and the Central Bank of Ireland, suggests that the lack of supply may be contributing demographic changes among households.
“The average age of an FTB rose from 31 years in 2008 to 34 years in 2020. During the same period, the average leaving the parental home also fell from 25.4 years to 28.1 years. The gap between the average age of leaving the parental home and the average age of a FTB fell from 5.6 years in 2008 to around 7.5 years in 2017, but fell to 5.9 years in 2020 . “
At the same time, input cost pressures are increasing as housing construction will have to compete for resources with other major infrastructure projects planned by the government.
“The price development in the Irish residential property market is mainly due to the lack of supply in the market. However, leading indicators have shown increasing pressure on input prices which could have a knock-on effect on output prices. For example, recent building material supply shortages due to the pandemic as well as Brexit have resulted in significant increases in input prices … Rising costs could lead to future price increases even though the shortfall in supply is closing. In addition, given the large investments planned by the government in housing production as well as other infrastructure projects such as a major housing renovation program over the next five years, it is likely that the pressures on input costs will rise and the availability of skilled labor may become a problem. As we build more homes to try and meet the demand required, it is critical that we address some of the cost issues where possible, so that lower costs can translate into lower prices and lower costs. better accessibility for potential buyers. “