ESRI: New house builds to fall this year in Covid-19 fallout

Work and machinery at a standstill at a housing development in Cork during the coronavirus lockdown. Picture: Denis Minihane.

The Covid-19 economic shock waves will mean new house builds will fall far short of what is required this year and next year, storing up further problems in terms of prices and rents in an already dysfunctional Irish property market, the Economic and Social Research Institute has warned.

In new research, the think tank for the first time puts numbers on the huge dampening effects to house building and to house prices entailed by the shutdown of building sites over the last two months and by the drop in household income and the surge in unemployment.

ESRI economists Matthew Allen-Coghlan and Kieran McQuinn forecast that only 18,000 new houses will be built this year and 28,500 next year, under a scenario where the economy recovers relatively quickly from the Covid-19 shock.

Under its “sluggish” scenario, only 15,000 new homes are built this year and 20,000 units are completed in 2021.

The figures compare with the 21,000 new homes built last year and are well short of the 35,000 annual new builds that the ESRI and other economists have long said are required to come anywhere meeting demand in the dysfunctional Irish property market.

Under its “V-shaped recovery” scenario, house prices by the first quarter in 2021 are unchanged from a year earlier, but have slumped 12%, under the “sluggish” scenario.

“Arguably, the greatest impact of Covid-19 on the Irish housing market over the longer-term may well be on the supply side of the market,” Professor McQuinn said.