Supply of new housing set to exceed last year in spite of construction sector constraints, says BPFI

First-time buyers account for almost two-thirds of mortgage approvals in 12 month to July

The number of new homes completed in the State could exceed 30,000 this year despite a slowdown in the second quarter and capacity constraints within the construction sector, the Banking and Payments Federation of Ireland (BPFI) has said.

Meanwhile, first-time buyers (FTB) continued to dominate the mortgage market, accounting for almost two-thirds of home loan approvals in the year to the end of July.

In its latest Housing Market Monitor report, the banking sector lobby group said some 7,353 units were delivered between April and June, a decline of 3.5 per cent from the same period last year.

However, on a rolling 12-month basis, the BPFI said a total of 30,546 new dwellings were completed in the year to the end of June, compared with 24,841 in 2022. Meanwhile, work on 8,212 new units commenced over the period, a 14.8 per cent increase on the second quarter of last year, further “encouraging signs” of future activity, said BPFI chief economist Ali Uğur.


“If the sector continues to build at the rate seen in the second half of 2022, it is likely that total completions in 2023 could reach over 30,000 units,” he said.

The BPFI’s outlook differs somewhat to those of the Central Bank of Ireland and the Economic and Social Research Institute (ESRI). In June, the Central Bank said it expects about 27,500 deliveries this year, below both last year’s output and the Government’s Housing for All target of 29,000, with the construction sector “constrained by labour and material shortages, viability concerns with high construction input costs as well as tighter credit conditions”.

In its summer economic commentary the ESRI said “dwelling completions are on an upward trajectory” but that “it is unlikely in 2023 that the level of completions will reach or surpass the almost 30,000 units achieved in 2022″.

Cairn Homes, the State’s largest home builder, said in its in interim results last week that it also expects 2023 completions to fall short of last year’s levels.

“In terms of future activity, we see that 18,546 units were commenced in the first seven months of 2023 compared with 16,587 units in the same period in 2022,” the BPFI said. “There were 28,916 units commenced in the twelve months to July 2023, similar to the level observed in the same period in 2022, which is an encouraging sign of activity for future completions.”

The Republic’s mortgage market, meanwhile, remains robust with strong demand for FTB mortgages despite an overall 7 per cent decline in mortgage drawdowns over the period.

Some 20,839 mortgages were drawn down in the second quarter compared with 21,895 in the first half of last year. The overall decline is due to the ongoing collapse in mortgage switching and remortgaging activity, an area of heightened activity within the market last year as borrowers piled into fix-rate products amid rising central bank rates.

Mr Uğur said it was likely that overall approvals and drawdowns, both in value and volume terms, will be lower than 2022, largely due to the decline of switching activity.

“At the same time, with strong economic fundamentals and latent demand, we expect solid demand for mortgages from the FTB segment,” he said. “FTBs accounted for almost 62 per cent of the volume and value of mortgage approvals in July 2023 with almost 30,000 FTB mortgages approved valued at nearly €8.4 billion, the highest annualised levels since the date series began in 2011.”

FTBs, typically the largest active cohort within the mortgage market, have dominated the mortgage market this year. Mortgage brokers have cited the ongoing shortage of properties to rent coupled with high rents for the surge in younger house-hunters seeking approval for home loans, many of whom are doing so without having a property identified for purchase.

Ian Curran

Ian Curran

Ian Curran is a Business reporter with The Irish Times