Housing supply must increase as prices exceed pre-crash peak, banking lobby warns

Lack of housing supply is the driving factor in climbing house prices, which continue in the Irish market.  Picture: Rui Vieira/PA

Housing supply has “improved significantly” so far this year, but amid a slowdown in property commencements it is “critical” this continues in order to tackle price increases, a new report has claimed.

House prices will likely exceed the levels observed at the previous peak of the market in April 2007, the report from the Banking and Payments Federation Ireland (BPFI) said.

Residential property prices increased at a national level by 14.1% in the year to June 2022, and have now reached levels not seen since before the housing crash in 2007.

The report, which covered Q2 of this year, said the number of dwelling completions is up 53.4% on last year, but dwelling commencements are down 43.5%.

“If the sector continues to build at a rate similar to the second half of 2021, the expected increase in supply levels over the next two years should help to meet the demand we are seeing as a result of the strong employment levels and income increases, and the Irish banking sector has the capacity to provide further sustainable mortgage lending,” said Brian Hayes, chief executive of BPFI.

“Our own BPFI figures show that for the first half of 2022 mortgage drawdown values have increased by around 37% compared to the levels observed in the first half of 2019, prior to the pandemic, while the volume of activity has increased by around 16% during the same period,” he said.

BPFI also observed a 13% year-on-year increase in drawdowns on first-time buyer mortgages to €263,312, the highest level since the data series began in 2003.

The latest Central Statistics Office (CSO) data shows housing completions are up 48% in the first half of the year on 2021, and are 46% higher than the same period pre-pandemic in 2019.

The report emphasised that “the main driver of the significant increase in average residential property prices in Ireland in recent years, has been the lack of supply of new homes as opposed to lending growth, which was observed in mid-2000s”.