Banks are expecting a 12,000 shortfall in new homes this year
There will be a shortfall of up to 12,000 new houses in 2020 due to the coronavirus shutdown and the workplace restrictions currently in place, the banking sector lobby has warned.
Publishing the latest Housing Market Monitor for Q1, the Banking & Payments Federation Ireland (BPFI) warns that restrictions imposed to halt the spread of Covid-19 will have a huge impact on housing supply this year.
Early estimates predicted as many as 26,000 new homes would be built in 2020 but these have been revised to 14,000 to 16,000 due to the shutdown and the existing restrictions on construction sites.
Dr Ali Ugur, BPFI chief economist, said housing supply "will take a significant hit this year" due to the construction shutdown from late March to mid-May. He said current activity is "very much limited" due to Covid-19 restrictions on construction sites.
"Estimates before the current crisis for total housing completions in 2020 were between 24,000 to 26,000 units," Dr Ugur said.
"Assuming that the sector could operate at 50% to 75% capacity for the rest of the year, we estimate total completions would be around 14,000 to 16,500 units in 2020 leaving a gap of between 10,000 and 12,000 units in total this year."
While supply may not be as plentiful as hoped, demand has not suffered, Dr Ugur said.
He said those on higher incomes have been impacted the least by the pandemic.
"Looking at those in receipt of either the Pandemic Unemployment Payment (PUP) or the Temporary Wage Subsidy Scheme (TWSS), we can see that those in the highest income brackets have been impacted the least," he said.
"Workers with average gross earnings of more than €950 weekly or about €50,000 per annum account for just 14% of those receiving the PUP payment and 21% of those participating in the TWSS scheme. Looking at these figures in the context of the mortgage market, it is earners in this same income bracket that account for the majority of those drawing down mortgages."
First time buyers with an income of less than €50,000 accounted for just 17% of the first time buyer mortgage drawdowns in 2019. Given the increasing share of first time buyers in the market, income losses "may not have had a significant effect on demand for mortgages from this cohort", Dr Ugur explained.
This is broadly in line with predictions made by KBC in their latest homebuyer survey.
The lender said demand for housing remains robust despite the Covid-19 shutdown. It said demand "may be somewhat softer in the immediate aftermath of the coronavirus" but some 32% of adults are "at least considering purchasing a home in the next two years", the bank said.
The index shows the majority (57%) of those planning to buy were first time buyers. This portion has increased at the expense of movers (30%) and investors (13%).
"This shift likely reflects an increase in pent-up demand through recent years because of a constrained level of property transactions and strong population growth," KBC Bank said.
