Housing supply unlikely to meet demand until 2023 or beyond

Banking industry body highlights disruption to housing supply from pandemic

Housing supply is unlikely to meet demand until at least the end of 2023 or beyond because of the disruption from Covid-19, the umbrella group for the banking industry has warned.

In its latest report on the housing market, the Banking and Payments Federation Ireland (BPFI) said there would be a significant decline in both housing completions and commencements this year due to the pandemic.

As a result, the supply of housing stock in the year ahead will fall well short of expected current and pent up demand, it said.

The group expects housing completions of 19,000-20,000 this year, which is better than many had expected at the outset of the pandemic.


However, it noted that commencement activity during 2020, which is an indicator of future supply, is down by 24 per cent compared with the same period in 2019.

It said there were almost 3,200 housing commencements in the July-August period, a decline of around 37 per cent year on year while Dublin and Dublin’s commuter belt recorded even higher levels of decline, 56.1 per cent and 48.7 per cent respectively.

Even if commencements pick up to 2019 levels for the rest of the year, the end-year total for 2020 is only likely to be 20,000, which will put pressure on the number of completions next year “at a time when most observers expected housing supply to catch up with both current and pent-up demand, estimated to be around 35,000 units,” the BPFI said.

It is therefore unlikely that housing output will reach the required 35,000 level until the end of 2023, it said.


Evaluating housing demand, the BPFI's chief economist Ali Ugur highlighted a significant rebound in both mortgage drawdowns and mortgage approvals in the third quarter, with October seeing €1.25 billion worth of mortgage approvals.

“This increased level of approval activity is expected to provide a good pipeline for mortgage drawdowns for the rest of the year as well as in the first quarter of 2021,” he said.

Housing demand is also likely to be boosted by better-than-expected income levels and improving economic conditions.

In its previous report on the Republic’s housing market, the BPFI argued that demand may hold up better than supply for the rest of the year given that certain sectors of the economy were not as badly affected as other sectors where employees were able to continue to work from home.

Mr Ugur said this trend is underscored by the most recent exchequer return figures from the Department of Finance showing that there was only a 3.3 per cent decline in the overall income tax take in the year to end of October despite significant number of employees being on some sort of state support during the period.

“Income levels as well as future expectations play an important role in housing demand, in addition to other factors such as demographics and interest rates,” he said.

“Given that some of the uncertainty around the overall economic effects of the pandemic that was present initially has been diminishing over time, demand for housing can continue to move on the trend that was evident before the pandemic,” Mr Ugur said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times