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New figures confirm demand for housing not being met by supply

The housing market monitor for the last quarter of 2021, which was published this morning by the Banking and Payments Federation Ireland (BPFI) indicates that a marked increase in demand for housing, matched by an increase in mortgage approvals, is not being met by a sufficient increase in supply.

 

Mortgage drawdowns increased by 25% in value in 2021 compared to 2020 as the steady growth since 2013, interrupted by the Covid restrictions, has continued. The value of those 43,494 drawdowns amounted to €10.5 billion. That is equal to an average mortgage of €230,000.  The value of approvals last year also increased by 30% to €13.4 billion, the highest since 2011.

However, the demand from potential buyers is not being met. Although the number of housing commencements in 2021 increased by 42% from 2020, that only amounts to 30,700 units which is not adequate to meet demand. More worryingly, the number of completions for the last quarter of 2021 was down by over 5% on the same period in 2020.

The figures for the final months of 2021 show that there was a negative trend across most of the key indicators. It will be noted in particular that the figures from the third quarter of 2021 showed a significant increase in both year-on-year house prices and rents. There is no sign that this is slowing, and indeed it is likely to increase again given the difference between mortgage-backed demand and housing supply, and also by the demand for scarce rental accommodation.

 

The total number of house completions in 2021 was just 20,433 which was slightly below the number for 2020. That is of course once again below even the modest targets set by the state if likely demand is to be met over the next decade and more – with expected demand of 50,000 to 60,000 new builds each year.

The BPFI itself forecasts that there will be 50,000 completions between now and the end of 2023 which even if met will both fall short of projected demand and latent demand.

Another significant trend, and one that we have noted before, is the greatly increased proportion of housing units that are apartments. Most of these will become part of the rental market and in 2021 around 75% of housing units completed in Dublin were apartments.

 

All of the statistics; including that over 35% of housing starts were in the Dublin region, and a further 25% within the Dublin commuter region, pretty much make a nonsense of the projections contained in the National Development Plan and Project 2040.

45.5% of planning permissions granted for housing units in the first nine months of 2021 were in Dublin along with 69% of planning permissions for new apartments. With the expected significant increase in immigration – even apart from whatever impact the current Ukrainian refugee crisis has – the 26 counties is going to continue to have a lopsided demographic and economy with an increasing share of the population living in high cost and disproportionately one and two bed apartments in the eastern urban conurbation.

There will be no “balanced regional development,” nor will there be anything to stop the trend towards high rise small unit rentals. And even the supply of these is likely to continue to be constrained if reports such as this and others are to be given credence.

Nor has it been just curmudgeons like myself pointing out all of this. The statistics I have referred to in relation to the likely, indeed certain, shortfall between political housing forecasting and promises – and that applies equally to Sinn Féin and the rest of the opposition as to the current government – are all from professional reports and sometimes from the state’s own experts.

Various reports published by the Economic and Social Research Institute, Davy’s stockbrokers, the Irish Institutional Property Group and projections from the bare statistics on population growth and migration would suggest that both the government targets for housing allied to the annual shortfalls which show no sign of being turned around, leave a yawning and increasing gap between current and future supply and demand.

Both the Davy’s and the IIPG reports refer to a requirement for between 50,000 and over 60,000 annual new builds over the short to medium term.

Each year, the gap between the political promises and forecasts – and the need of people for a place to live – and the actual reality of the numbers of houses and apartments being built and the costs of buying and renting them, grows.

This report is just another sobering snapshot of that ongoing scenario and the reasons it is unlikely to change for the better any time soon.

 

 

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