Government action underpins strong demand in the new homes market

NEW HOMES: The Government has set itself a target of no less than 50,000 public housing units, reports Conor Power
Government action underpins strong demand in the new homes market

the Government's target of no less than 50,000 public housing units will  bring some balance to the housing market which for so long has been suffering from lack of supply.

When the current administration was laying out its Programme for Government a few months ago, the housing situation in Ireland was placed front and centre of priorities, with a commitment to increasing the supply of houses – both private housing and social-and-affordable housing.

While we wait to see how the Budget will impact on the sector, it’s worth reminding ourselves of the target the Government has set itself from the public housing point of view an increase to no less than 50,000 units.

It’s a target that, if achieved, will certainly bring some balance to the housing market which for so long has been suffering from lack of supply. It’s still well short of a recommendation from the National Economic and Social Council back in 2012 of 200,000 units but progress is progress and should always be welcome.

In the meantime, the New Homes market is very much alive and kicking, with a good number of properties coming on stream and with demand proving to be stronger than ever. 

The pent-up demand after the initial Lockdown period due to Covid-19 has stretched out into what continues to be an incredibly busy year for auctioneers all over Munster and the rest of the country.

According to Catherine McAuliffe, Director of Savills in Cork, there has been a noticeable increase in activity from a social housing point of view which, she says, is an important factor in keeping the new homes market stable.

“If you look around, you’ll see quite a few social houses being built alongside the private houses,” she says, “I would actually say that you’re seeing certainly as many social houses being built as private houses. 

"A perfect example of that is in Maryborough Ridge in Douglas, where you saw quite a number of them… so I think that the supply of social houses is increasing. It’s absolutely a good thing; clearly, there’s a huge demand for it so it needs to be Number One on their agenda but privately, it’s up to the individual developers and it’s good that the Government are giving them that incentive at the moment.”

 With State support seemingly kicking in, it is the continuing strong demand that will have the inevitable knock-on effect of increasing supply through the raising of confidence in the building industry, as Paul Hannon, Director at Sherry Fitzgerald New Homes in Cork points out:

“In the New Homes sector, there’s strong activity with developers acquiring land and going for planning permission and once this demand is there, it underpins the viability of building new developments and getting finance with the banks for their schemes. No development will take place speculatively unless there is that kind of underpinning of constant demand.”

 The creation of constant demand is largely a function of the market itself and how it performs. We are fortunate in that many key industries have remained relatively unaffected by the Covid-19 and its associated restrictions so demand is still strong. 

And the Government has also played its part in underpinning that level of confidence by maintaining the improved the Help-to-Buy scheme; a vital aid, auctioneers agree, for the housing industry in general and particularly for first-time buyers looking to buy a new home.

Help-to-buy scheme a vital help but supply still an issue 

The first-time buyer is the lifeblood of the New Homes market, with various auctioneers reporting that this sector of the market represents anything from 60% to 80% of their overall sales figures.

Since the 23rd of July last, the Help-to-Buy (HTB) scheme has been enhanced to allow first-time buyers to claim up to €30,000 on the cost of a new home. This is an increase from the previous maximum of €20,000. Under the scheme, claimants can now get a tax rebate on 10% of the cost of the home for properties up to the value of €300,000. The scheme also applies on properties valued up to €500,000 but the maximum of €30,000 per home still applies.

According to Paul Hannon, this has been a very important development and it is particularly felt in the Cork market that he’s most familiar with:

“The enhancement of the Help-to-Buy scheme from 5% to 10% to the end of 2020 is particularly relevant in Cork,” he says, “as the price point that benefits most from the enhancement is for properties priced up the €300,000 level, doubling the rebate. We find that it has mobilised and motivated another group of first-time buyers.” 

Conor O’Connell – Director of the Southern Region of the Construction Industry Federation (CIF) – also recognises the difference that the expanded scheme has made as well as the timing of its introduction, coming at a point in the year when an added push helped to keep things moving in the new homes sector:

“The expansion of the Help-to-Buy scheme has been a significant help to the industry,” says Conor. “It’s now ensuring that people trying to get on the property market for the first time are helped out significantly with the deposit issue. For an awful lot of people, one of the biggest impediments towards getting on the property ladder is saving for a deposit, so that’s of great help and it’s very much welcomed.

“Its timing was very good as well because it came about during the summer when the industry was very nervous about what the market conditions would be like after the Lockdown period of Covid.” 

The forthcoming National Budget will reveal whether or not this scheme will be extended beyond the 31st of December. One can only speculate at this point but, given the precarious nature of so much of the economy during this continuing Covid crisis, it would be difficult to imagine the Government doing anything other than ensuring that it is in place for another twelve months.

Supply of homes remains a live issue in the New Homes market and the figures for this year so far have seen a significant decrease in completions of homes.

However, the first point to take into account is that of the disruption to the building industry by the Coronavirus. While demand for housing remained unaffected and the business of showing and selling houses continued but at a slower and safer pace to conform to safety guidelines, the building industry had an altogether more disruptive time of it.

 First, there was a complete cessation of activity on buildings sites all over the country for over three months. Then, building resumed but at a far slower pace over the summer, resulting in a significant backlog.

It’s not surprising, therefore, to see that estimates of completions for the whole of 2020 are, according to the CIF, 16,000 for the entire country. Even though these are only provisional numbers, the fact that the total for 2019 was 21,241 illustrates how much the virus affected the building industry.

There were important small victories, nonetheless. Despite the huge disruption, a good number of homes were completed in the first half of 2020 in Cork city and county, sometimes almost completely bucking the trend.

“In terms of completions, between January and June this year, there were 547 units completed in Cork County and 385 in the city,” says Conor O’Connell. “The numbers in the city actually represent a small increase from 2019, when there were 305 in the same period last year. 

"In the county, the figures were down from 652 from the first half of 2019. Those figures are better than what people expected overall, considering the disruption that there was to the building industry in that time.”

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