Call for 200,000 new homes to be built in next three years as housing crisis deepens 

Davy Stockbrokers has warned that house price rises will continue to accelerate, along with construction costs due to the disruption caused by Covid

Davy claims 200,000 new homes are needed.

House price growth is likely to accelerate and the gap between supply and demand is set to widen as the fallout from the Covid crisis heaps more pressure on Ireland’s beleaguered housing market, Davy Stockbrokers has warned.

Davy has estimated that about 200,000 new houses and apartments will need to be built over the next three years. That figure will need to accommodate a rapidly growing population, the already factored-in minimum of 30,000 new annual builds needed and replacements for obsolete accommodation which is in need of rebuilding, Davy said.

“Ireland’s population is now close to 5m [people], beating forecasts due to sustained net inward migration. We estimate that excess demand is now 106,000 households, with a further minimum of 30,000 units per annum required to satiate population growth,” said Davy chief economist Conall Mac Coille.

“There are signs of a supply response – 26,500 starts in 2019, 45,000 units granted planning permission in 2020 and 69,000 proceeding through the fast-track planning process, and 10,000 apartments now under construction in Dublin. However, judicial reviews and uncertainty could delay this supply response,” he said.

Davy has also warned that house price rises will continue to accelerate, along with construction costs due to the disruption caused by Covid. 

Bank of America warned this week that rising construction costs – including raw material and transport costs – and supply chain issues could hinder the supply of new houses and fuel further price increases.

Help-to-buy scheme will add stimulus

However, Davy said Government policies – such as the help-to-buy scheme and the equity loan scheme – will add stimulus in the market and could help supply.

But, while social housing policies are “commendable”, Mr Mac Coille said new policy solutions are required to boost supply and contain an expected spike in house prices.

Davy’s concerns chime with those of economic thinktank the ESRI, which has said there is a “pressing requirement” for the Government to spend more money to increase housing supply and ease pressure in the market.

The ESRI expects 18,000 new houses to be fully built this year and 21,000 more in 2022. However, it said reaching the minimum annual output target of 30,000 new homes has probably been set back “a few years” by disruptions caused by the pandemic. It warned housing supply now “may take some time” to recover.

The ESRI wants the Government to double – to €4bn – its investment in affordable housing to stave off a further cycle of rising prices and rents.

The Irish Homebuilders Association has called for planning reform and critical infrastructure investment to help remove supply blockages, saying Covid and Brexit complications have led to "serious challenges" for the sector.