Pressure on house prices and rents set to remain
Data show that in the eight months to August, house completions were up 19% compared to the same period in 2015.
Based on their current run rate, completions are in line to rise to around 15,000 units this year compared to the 12,700 total for 2015.
Forward-looking indicators of activity - such as house guarantee registrations (which tend to reflect developer activity) and commencement notices - show that the uptrend in building activity is continuing.
Meanwhile, survey data, such as the housing component of the construction PMI, remain well into expansionary territory.
Overall, though, in terms of supply levels, the 15,000 new residential units projected for this year are still significantly below the estimated 25,000-30,000 units that are required to be built each year to meet housing demand.
The shortfall in supply is also reflected in the quantity of properties listed for sale and rent. Daft.ie data on houses available for sale show that there were 25,260 properties listed, a fall of 15% compared to June 2015.
Meantime, the stock of properties for rent was down 22%, on a year-on-year basis, in August.
The amount of new mortgage lending and number of sales transactions are being heavily impacted by the low level of residential supply.
In addition, the Central Bank regulations have also had a dampening impact on mortgage activity, which was especially evident in the second half of last year and early part of this year.
More recent data, though, suggest that the drag arising from the introduction of strict mortgage rules may be waning.
The number of mortgage approvals rose by over 25%, year-on-year, in the three months to August. However, the lack of supply is likely to remain a key impediment to both transaction levels and mortgage volumes in the market.
The persistent mismatch between supply and demand has meant that both prices and rents have remained on an upward trajectory. The CSO recently launched a new Residential Property Price Index (RPPI).
The new index gives a much more comprehensive view of market activity, as it now includes both mortgage and cash purchases - the latter were not included in the old index and represent around 50% of all purchases.
The new data set also provides details on regional house price trends.
At a broad level, the peak-to-trough decline in house prices between 2007 and 2013, under the new RPPI, is 54.5% versus 51% in the old index.
In terms of the performance since the trough, the new RPPI is up 43% - as of July - compared to 37% in the original index.
Dublin has led the recovery, with prices up over 60% from their lows; while outside Dublin, prices have risen by 40%.
Both nationally and in Dublin, prices are still 35% below their peak level, which was reached in April 2007.
Data for recent months show a renewed strengthening of house prices, which rose by 1% in June and 2.5% in July to leave them 6.8% higher on a year-on-year basis.
Dublin prices were up 3.8%, year-on-year, in July, with non-Dublin prices rising 11.3%.
Clearly, the Central Bank rules on mortgage lending have had a far greater impact on the Dublin market than elsewhere, as prices are much higher in the capital.
Meanwhile, rents continue to rise strongly and were up by 8.9%, year-on-year, in August.
They are now over 8% above their previous peak according to CSO data, reflecting the particularly acute shortage of properties in the rental market.
The persistent under-supply of new homes since 2009, especially in Dublin, means that a large shortfall has built up in the market.
The cumulative deficit in Dublin was estimated at over 50,000 units in the Governmentâs recent Action Plan on Housing.
This suggests that in order to address both the accumulated under-supply and meet future housing demand, new house building will need to rise above 25,000-30,000 units per annum.
We are still quite some years away from reaching such a target, pointing to ongoing upward pressure on house prices and rent.
