Warning that higher build costs will hit first-time buyers even as supply increases

The level of new-home completions in 2024 is likely to exceed 32,000 units, according to research published today by the Banking and Payments Federation of Ireland (BPFI) in the lobby group’s regular Housing Market Monitor.

That will be highest rate of new homes delivered since the financial crisis, though still well below the level of demand pent up over the past decade.

However, while increased supply is good news for potential buyers, the research shows construction costs have increased by nearly 23pc between the end of 2019 and the end of September this year.

Brian Hayes, the CEO of the BPFI, said higher building costs risked further eroding affordability.

“Given that average home prices have increased faster than the incomes of potential home buyers in the past few years, looking forward, it will be important to monitor cost challenges in the sector while building more homes so that better affordability can be provided for potential home buyers,” he said.

Higher prices passed on to buyers would threaten the current trend for some moderation in the pace of house price rises.

While construction costs are up, house prices also rose 1.4pc in the 12 months to September 2023 on average compared with a 10.8pc the year before.

That was helped by increased supply, and price-moderating measures such as the mortgage lending caps – even though other measures such as the shared-equity scheme and a loosening of Central Bank lending rules risked driving up demand without increasing supply.

Today's News in 90 Seconds - December 19th

The International Monetary Find (IMF) warned last Friday that interventions by the Government and Central Bank could stoke demand for housing and push up prices.

In a report on Ireland’s economy, the Washington-based fund said Central Bank mortgage measures “should not be used to address broader housing-affordability issues” and advised that rent controls be scrapped.

Meanwhile, the BPFI said level of mortgage activity had remained resilient despite cost-of-living challenges and uncertainties weighing on would-be buyers.

Lending was also affected by a big decrease in mortgage switching.

“Mortgage activity has remained resilient, with mortgage approval values reaching €14.7bn in the 12 months ending October 2023, with nearly 52,000 approvals,” the BPFI said.

That’s well down on lending last year but only because of a sharp drop in mortgage switching as European Central Bank (ECB) rates shot up. The volume of genuine new lending is up.

First-time buyers drew down more than 7,000 mortgages in the three months of July through September, the highest volume for that period since 2007.

Planning permission statistics point to further supply – although not all are likely to be delivered.

The number of residential units granted planning permission rose by 43.3pc year on year in the third quarter of 2023 to 9,662.

Around of half of them were for apartments, permissions for which had doubled in a year.

The Dublin commuter region accounted for 14.9pc, a drop in the overall share, while Kildare, Limerick, Louth, Meath and Westmeath saw increases.

The number of dwelling units approved in Munster decreased by 12.9pc year-on-year, though numbers of apartments were up.