Higher number of housing builds threatened by labour shortages

There was a 42 per cent increase in the number of housing units that commenced construction last year – the most in any year since 2007 – but the pipeline is under threat from labour shortages in the building sector, according to a new report.

The latest Housing Market Monitor for the final quarter of 2021, published today by Banking & Payments Federation Ireland, showed more than 30,700 housing units got under way in 2021, which was more than 2016 and 2017 combined.

The report described this as “a significant pipeline” for output for the residential construction sector in addition to some of the units that started in 2019 and 2020 but were not completed due to the pandemic.

Capacity

“The capacity of the construction sector is crucial in terms of increased housing output in the future,” it said. “At the end of 2021, there were over 158,000 people employed in the sector similar to the employment levels in 2001.

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“However, it is important to note that the composition of construction sector employment has changed significantly since then and parts of the total employment in the sector are engaged in other construction activity such as commercial buildings and infrastructure.

“Given the significant pipeline of residential housing commencements, it is likely that the next two years will be crucial in testing the capacity of the residential housing sector being able to deliver units in order to meet demand.

“Notwithstanding potential capacity challenges in the construction sector, we expect more than 50,000 new residential units to be built between now and the end of 2023.”

The number of residential units granted planning permission fell by 16 per cent year-on-year in the third quarter to 11,428. The number of units also fell by 15.6 per cent in year-to-date terms to 29,541.

More apartments than houses were granted planning permission for the ninth successive quarter. The number of apartments granted planning permission fell by 14 per cent year-on-year in the first three quarters of 2021 to 18,165.

Within houses, the number of multidevelopment houses granted planning permission fell by 41.5 per cent year-on-year in the first nine months of 2021, having fallen by 2.8 per cent in the same period of 2020 and by 9.3 per cent in the same period of 2019.

There were 20,433 completions during the year, which was slightly below the 20,526 completions in 2020.

“Given the strong completion levels observed in the first half of 2021, expectations were that the total completion levels would be higher for the full year,” noted the report.

“However we see that there was a 5.3 per cent decline in completions in the last quarter of 2021 compared with the same period in 2020, which is due to the effects of the pandemic on construction sites.”

The most recent CSO labour force survey shows that absences in the construction sector in the last quarter of 2021 were at nearly 12 per cent, similar to levels observed during the last quarter of 2020.

Sector

Prior to the pandemic, the rate of absence in the sector in the last quarter of 2019 was at about 8 per cent.

“It is likely that similar absence levels may be observed in the first quarter of 2022 given the wide circulation of Covid-19 in society, so output in the first quarter of 2022 may be negatively affected which could affect overall output levels for the year,” the report said.

“We estimate to be between 25,000 and 27,000 units, which is substantially higher than 2020 but less than the estimated 30,000 per year needed to meet demand.”

Residential property price inflation accelerated again in the final quarter, with prices up by 14.4 per cent in the twelve months to December, compared with an increase of 2.2 per cent in the year to September.

The CSO’s national index was only 4 per cent lower than its highest level in April 2007 and the highest level since March 2008.

The annual rate of rental inflation was 8.3 per cent in the third quarter, with the national standardised rent level increasing to €1,397.