Housing completions improve to meet demand while mortgage drawdowns decline

In the first six months of the year there were 20,389 mortgage drawdowns, a 7% decline year-on-year, mainly due to the significant drop in switching activity, said the BPFI

The BPFI Housing Market Monitor showed that output levels are improving, but that the housing crisis continues to put pressure on the economy.

Housing output has ramped to meet demand but the number of units being delivered is barely meeting the requirement to address the accommodation crisis, a new survey indicated.

A new report by the Banking and Payments Federation Ireland (BPFI) suggested that total completions this year could reach over 30,000 units however this is the minimum number of completions needed to tackle the chronic supply shortage in the housing market.

AIB economist John Fahey recently wrote in the Irish Examiner that significantly more than 30,000 units are required to be built on an annual basis to meet yearly demand as well as the pent-up demand as growth in occupied dwellings averaged 23,000 in the period from 2016 to 2021.

The BPFI Housing Market Monitor showed that output levels are improving though as the housing crisis continues to put pressure on the economy.

On a rolling 12 months basis, a total of 30,546 units were completed at the end of the June quarter, compared with 24,841 units during the same period in 2022. In addition, 18,546 units were commenced in the first seven months of the year, almost 2,000 more than in the same period a year earlier.

In recent months, an increasing number of employers have told the Irish Examiner that a shortage in housing is impacting recruitment and growth especially as Ireland reaches full employment and firms are trying to attract staff from overseas.

Meanwhile, the BPFI’s survey showed first-time-buyer mortgage activity remained robust despite overall market slowdown.

During the first six months, there were 20,389 mortgage drawdowns, a 7% decline year-on-year, mainly due to the significant drop in switching activity, said the BPFI.

“It is likely that the total number of mortgages approved and drawn down at the end of 2023 will be lower than the levels observed in 2022,” said Ali Uğur, BPFI chief economist.

“At the same time, with strong economic fundamentals and latent demand, we expect solid demand for mortgages from the first-time buyer segment,” he said.

First-time-buyers accounted for almost 62% of the volume and value of mortgage approvals in July with almost 30,000 of these mortgages approved and valued at nearly €8.4bn, the highest annualised levels since the date series began in 2011.

A separate survey by BNP Paribas Real Estate, showed activity in housing and in other parts of the Irish construction industry unexpectedly slowed in July, as inflation costs edged higher.