Demand for new homes outstripping supply, warn builders

House builders today attempted to instil confidence in the falling market claiming more units than forecast would be completed this year.

Even though developers conceded the sector will remain stagnant until next year, they warned supply was already falling short of demand.

The Irish Home Builders Association (IHBA) lobby group said housing output could drop to as low as 37,000 units next year compared with 45,000 this year.

“Given that the medium term demand for houses is 60,000 units each year, this would result in supply falling far short of demand in key growth areas next year,” IHBA director Hubert Fitzpatrick said.

“Based on this medium term rate, supply and demand equilibrium would not return to the housing market until 2010.”

House prices have plummeted by more than 7% in the last year knocking around €24,000 off the value of the average home.

The group claimed however its members were reporting more confidence in the sector and predicted the number of housing starts to continue to pick up.

“IHBA expects therefore that 2009 will see higher levels of residential construction activity than is currently the case,” Mr Fitzpatrick said.

“From the industry’s perspective, however, there is a potential for increased employment in the sector compared to current levels of employment in residential construction.”

The IHBA said the main sources of confusion around the housing market had been addressed, partly by the Government’s reform of stamp duty and mortgage interest relief. The group also said it expected interest rates to fall again later this year.

And in further attempts to instil faith in the housing market, the IHBA has set up a website www.homefacts.ie which has advice on affordability, tax and mortgages. It is designed to act as a step-by-step guide to house buying.

The IHBA also revealed plans for a Code of Practice for member firms to regulate housing and apartment management companies.