New Homes: Supply to come good later in the year

Property sector analysts expect that State efforts are finally set to deliver for would-be buyers in the new homes market

Good times for new homes: Some new housing developments are "out of the traps early" and there are more to come, which is an unusual positive for this time of the year.

There’s still no doubt that the supply of new homes is still well short of demand.

A turning point has been on the cards for some time but there seems to be a realistic expectation amongst commentators in the market at the moment that governmental efforts will finally begin to see fruit in turning this ship around.

“We have a good few launches coming up,” says Elizabeth Hegarty, Associate Director of Savills New Homes. “And, I would say that it’s fairly unusual to have already had two new homes launches by February. Normally, you wouldn’t be doing as many at this point in the year, but we’ve been out of the traps early with these and with more to come, which is great.” 

 Paul Hannon, director at Sherry Fitzgerald New Homes, said: “We’re still in a situation where supply is very much restricted, and that creates certain false economies, both in the new and second-hand house markets. There’s such a lack of stock, which means that the same people are chasing the limited amount of stock that’s there.

“The Government has made the decision that if they increase the affordability of houses, it will in turn give confidence to the developers and their backers to build more units, knowing that there is a guaranteed market at the end of the process,” he said.  

 “That’s how it’s playing out and we’d still like to see more supply if we could get it. There are huge issues still around planning, but that’s being changed with the new Planning Act under review at the moment. We have about eight to ten schemes that we should be building at the moment but which are stuck in the planning stages, so we’d expect things to change soon.”

Stability in materials costs and calmer inflation in property  are leading to an increased supply of affordable homes.

Affordability still an issue for many new buyers

 “Any new three-bedroom semi-detached home is in the region of €300,000 to €350,000,” says Pat Davitt, CEO of IPAV. “And that’s throughout the country, without ever going to the cities. So the measures increasing affordability are helpful but I think that it’s still quite difficult for First Time Buyers to get on the property ladder.” 

 In order to increase the affordability and supply of new homes, Pat says, the costs have to be looked at. Compared to this time last year, materials costs have at least stabilised and the runaway inflation that seemed to be taking hold appears to have calmed in this sector at least; which holds hope for price stability ahead, leading to an increased supply of affordable homes.

“Last year, we were surprised that there were so many new homes built,” says Pat Davitt of the IPAV. “It was in the region of 30,000 and we had thought it would have been more like 27,000. It looks like this year, you’d like to think that there will be more new homes built but I think that it will be a push to get another 30,000 homes built this year. If it will happen, it will be a very big help. 

 “A lot of people feel that the prices of materials may stabilise or come down. That would be good news for builders and I think it’s good news for home buyers at the end of the day. A lot of this uncertainty that was there this time last year when such costs were going up by the week, has eased off to a certain degree. And if a lot of materials like timber and insulation come down in price, it would be very good news. I’d expect that it will happen.”

There is also work going on under various other initiatives designed to get the market flowing and to get more people owning their own home.

Will apartment living make a big comeback?

In a growing economy where people want to live in big towns and cities, the provision of apartments is important but building them and/or developing them has become unfeasible in recent years, just as our need of them was becoming ever greater.

Work is afoot in the background through the Land Development Agency, however, to ensure that apartment building will recommence and we may even see the physical reality of that in Cork within the next calendar year.

There is also work going on under various other initiatives designed to get the market flowing and to get more people owning their own home — all of which contributes to a better, more affordable New Homes market.

There’s an initiative called Tosaigh, for example, where the Land Development Agency have acquired housing units through developers, to be sold on the private housing market to qualifying buyers with a purchasing power that’s below 85.5% of the price of the house. Those people can then qualify for a discount of up to €75,000 on the price of the house.

“There is a lot happening in the background,” says Paul Hannon, director at Sherry Fitzgerald New Homes. “We’re very hopeful that we’ll see some apartment developments in the not-too-distant future through the Croí Cónaithe initiative under the Housing for All programme, which is a subvention to developers for apartment delivery. I’m hoping that we’ll see movement on this issue within the next few months.” 

 There is also some talk amidst the corridors of the powers-that-be of a VAT reduction in such property. Very often, the bean counters in Government like to classify VAT reduction as a loss of revenue but as they’ve illustrated with the retention of the 9% hospitality VAT rate recently, keeping certain taxes low enough to stimulate economic activity is also important. 

And would a loss of revenue on paper be really a loss if it meant more people could live in a home of their own in this country?