Irish construction costs have increased by close to 23% since 2019.
IRELAND’S HOUSING SUPPLY is expected to increase next year but a continued rise in construction costs indicates that affordability issues could remain.
The findings are part of the latest housing monitor for Quarter 3 of this year, published today by the Banking & Payments Federation Ireland (BPFI).
The report noted that increased housing output this year helped to ease housing inflation amid a “significant” increase in housing completions this year.
The average residential property prices increased by 1.4% in the year to September, compared with a 10.8% annual increase in September 2022.
There are close to 31,600 new houses completed in the twelve months to September of this year, compared to around 27,500 in the previous twelve months to September 2022.
Meanwhile, in the third quarter of this year close to 8,500 houses were completed, with Dublin accounting for 42.2% of all completions and 80.8% of apartment completions.
Housing starts in the first ten months of 2023 were also 17% higher than in the same period of 2022, with 30,744 units started in the twelve months to October 2023.
The BPFI said it’s “encouraging to see that the number of housing starts continues to increase”.
It added that this “provides a good pipeline for the level of completions in 2024, which is likely to exceed 32,000 units”.
Looking at the medium and longer-term outlook, around 37,600 housing units were granted planning permission in the twelve months to September 2023.
However, increased construction costs could cause affordability issues.
Between the end of 2019 and the third quarter of 2023, construction costs increased by close to 23%.
The increase over the same period between 2015 and 2019 was only 9%.
Chief executive of the BPFI Brian Hayes said “average home prices have increased faster than the incomes of potential home buyers in the past few years”.
He added that “it will be important to monitor cost challenges in the sector while building more homes so that better affordability can be provided for potential home buyers”.
The BPFI has described mortgage activity as “resilient” despite cost-of-living challenges.
Brian Hates said: “At the beginning of the year, it was expected that housing and mortgage demand could be negatively affected due to the fall in the purchasing power of households caused by higher housing and general living costs, as well as the future uncertainty in the wider economy.”
However, he said mortgage activity “remained resilient”, with mortgage approval values reaching €14.7 billion in the twelve months to October 2023 with nearly 52,000 approvals.
And while mortgage drawdown volumes declined by 21.8% year on year in Q3 2023, Hayes said this was “mainly due to the significant decline in switching activity”.
Re-mortgage or switching activity fell by 78% year-on-year, the lowest Quarter 3 volume since 2017.
Hayes also noted that “first-time buyers drew down over 7,000 mortgages during Q3 2023, the highest Q3 volume since 2007”.