Housebuilding holding up but 'acute undersupply' to last

Goodbody economists in 'Embarrassment of Riches' report suggests the Government has a wealth of options to deal with the crisis

'The mobilisation' of the activities by the State, including local authorities, approved housing bodies, and the Land Development Agency will go someway to offset the exit of some private landlords from the market, report says.

Housebuilding is holding up better than once feared despite interest rate hikes, Goodbody economists have said in their "Embarrassment of Riches" economic report that suggests the Government has a wealth of options to deal with the crisis.

The latest “health check” on the economy by Dermot O’Leary and Shaun McDonnell projects that 30,000 homes will be completed this year and in 2024, as the Government steps up its activities to meet the crisis, but they warn the market will likely remain "in an acute undersupply” for some time. 

“The mobilisation” of the activities by the State, including local authorities, approved housing bodies, and the Land Development Agency will go someway to offset the exit of some private landlords from the market, say the Goodbody economists, but who warn that “this level of supply is clearly insufficient to keep pace with the combination of growing population and and the pent-up demand built up over the decade”.

Goodbody projects apartments will play an outsized role in the  construction of 30,350 new homes next year, slightly higher than this year’s levels, but up from the 21,110 homes completed in 2019 before the onset of the pandemic.

The report forecasts interest rate hikes will keep house price inflation flat across the Republic this year, but home prices will rise by 3.8% in 2024.

Dublin prices that rose almost 6% in 2022 will fall by almost 1% this year, and then rise by 4.2% in 2024, while prices outside Dublin, which increased by over 9% last year, will rise 1.7% this year, and by 3.7% in 2024, the economists project.

Average house price

That means the average house will sell for €346,460 this year and then rise to €359,780 in 2024, according to the forecasts.

“The embarrassment of riches” refers to the bumper corporation tax receipts flowing into the exchequer that will deliver the largest budget surplus in the eurozone for the Government of €12.4bn, in 2024.

Goodbody projects the resilient economy will grow 2.6% this year, under the modified domestic demand measure, up from only 0.7% in an earlier forecast.

“The ‘war chests’ of robust Government and household balance sheets remain an important attribute of the Irish economy, positioning it well in the face of ongoing risks in the international economy and higher interest rates,” the economists say.

The report also highlights that levels of business investment in the economy appears to be holding up, helped by the construction of “data centres and microchips”.

“Ireland is a recognised hub for this fast-growing extent of energy use by the sector highlights the priority to focus on improving the country’s energy infrastructure, taking account of sustainability objectives,” according to the Goodbody report.