What estate agents say about the new-homes market: ‘Supply will yet again not come close to meeting demand’

The Help to Buy and the First Home shared-equity schemes continue to play significant roles for first-time buyers

Gemma Lanigan, head of DNG New Homes

The increase in new-homes stock, fuelled by the high number of building-site commencements (nearly 33,000 in 2023), is to be welcomed. Despite this good news, supply will yet again not come close to meeting demand, especially in the entry-level price bracket dominated by the first-time buyer.

The Help to Buy scheme and the First Home shared-equity scheme continue to play significant roles for first-time buyers. With more attractive mortgage interest rates available to buyers purchasing properties with a higher Ber rating, buyers are now more aware than ever of the merits of an A-rated new property.

Thankfully, mortgage interest rates appear to have stabilised. While it is unlikely that interest rates will decrease significantly in the medium term, their stabilisation is very welcome.

We are also delighted to see many new affordable homes schemes due to come to the market in 2024. These homes, which are made available through the Local Authority Affordable Purchase scheme, will be in greater demand as awareness of this excellent scheme grows among purchasers. To date, any release of affordable homes by a local authority has been significantly oversubscribed and therefore more affordable homes schemes will be required to meet the level of demand.

Ivan Gaine, managing director of Sherry FitzGerald New Homes and chairman of Property Industry Ireland

In 2023, the new-homes market experienced significant developments, with housing output and delivery influenced not only by market forces but also by the housing system, incorporating policy and politics. Reforms are under way, showing positive impacts and a recent uptick in commencements.

Most successful countries and cities have their challenges around planning and delivery of housing – it is not a uniquely Irish issue with similar deltas in supply and demand and debates ongoing around the world.

Last month, completion data revealed about 32,595 homes finished in 2023, with affordable homes (AHB) and the State sector playing a growing role. Only about one-third of completions enter the market for sale, while the rest comprise social homes, rental homes (decreasing proportion) and self-builds. Despite a year-on-year increase in gross completions, especially in apartments, the targets are still too low.

The ongoing review of the National Planning Framework (NPF) and Housing Needs Demand Assessment (HNDA) is the priority for the industry. Planning for the future involves setting supply targets closer to 60,000 per year, ensuring sufficient infrastructure, utilities, schools, amenities, parks, transport, and land management are in place before building up construction-sector skills and capacity.

One of the simpler initiatives introduced last year which was instantly effective was the temporary waiver of development contributions and a rebate of the Irish Water levy which is currently due to expire in respect of new commencements after April. This is effective and aids viability, particularly in the regional cities and supports delivery for all tenures.

The First Home shared-equity scheme and Croí Conaithe (owner-occupier apartment subsidy) are gaining momentum, and new guidelines on compact settlements were welcomed in January. The Planning and Development Bill is progressing through various stages, with an intention to enact it before summer.

While progress is being made in implementing new policy measures, it is imperative to fine-tune the new policy framework and strategically plan for our future communities.

Sarah Murray, director of new homes at Savills

Given the level of sales activity and pickup in demand already experienced, 2024 looks set to be another strong year for the new-homes market. However, while an increase in overall housing supply is anticipated, supply is unlikely to improve in the coming months.

This ongoing deficit in supply will continue to impact the market driving quicker sale time frames and, in certain locations, increased pricing. This has led to today’s buyer being prepared and ready to purchase more quickly as they are educated on mortgage finance and, where applicable, the Government-supported buying incentives that have seen a significant uptake in recent months.

Another feature of the market that looks set to continue is the increasing demand for apartments, duplex and town houses. These properties appeal to all types of buyers as it tends to be more cost-effective to purchase than rent, in particular for buyers availing of buying incentives and lower green mortgage rates. Similarly, another feature of the market, evidenced in 2023, is buyers considering purchasing a new home further afield. Where once buyers may have limited their property search to areas that are well known to them, today’s buyer is happy to consider a well-serviced new town or location in their pursuit of new, energy-efficient housing.

Ray Palmer-Smith, director of new homes at Knight Frank

The year has started strongly and we have agreed more than €100 million in new-homes sales already. The extension of the Help to Buy scheme, as well as the First Home scheme, will continue to support the demand for new homes, while the prospect of interest rate cuts this year will also provide buyers with more certainty and comfort regarding mortgage costs. Factors underpinning demand in the prime new-homes market, particularly with downsizers buying apartments, include the running-cost savings and the lack of refurbishment works associated with new homes.

Forecasts suggest that 35,000 units will be delivered to the market in 2024. While this would represent another welcome increase, further growth is required to meet demand which is estimated to be in the region of 50,000 units. The ongoing shortfall with strong demand is likely to set the scene for another year of price growth across the new-homes market.

Efforts to streamline the planning process through the new Planning and Development Bill will be closely watched. Increasing the supply of zoned and serviced land should, however, also be the focus of renewed efforts.

Judy Sorohan, director of new homes at Hooke & MacDonald

As we look to what 2024 may hold in store for the new-homes market, it is anticipated that we will see some similar trends to 2023. Construction activity is expected to remain at a level where 34,000 or 35,000 properties are delivered to the market; 2023 saw 33,000 completions.

While this is still a marked improvement on where we were a few years ago, we still have a way to go to achieve the 55,000 or 60,000 that are needed to deliver an adequate number of homes and meet the needs of the growing and ageing population.

There is strong focus on the first-time buyer, which is the area of the market that is most active. However, it is important to also deliver the right types of property to other purchasers such as those looking to downsize from larger properties. The delivery of such would also help to increase the numbers of second-hand properties being brought to market.

This tight level of supply is expected to underpin stable prices both in the Greater Dublin Area and nationally with potential for moderate growth.

It remains to be seen if interest rates begin to come down in the spring. This will have an impact on affordability and how the market performs for the year.

Demand for new homes remains robust given the wide gap between levels of energy efficiency in new-builds and existing properties. Consideration must be given to the associated costs in delivering new-build properties with A Ber ratings. This, coupled with the 10 per cent levy on concrete blocks, pouring concrete and other concrete products, adds to high costs for builders.

While there are signs of improvement with the new large-scale residential planning system, we have yet to see how it copes with a high number of applications. Reports also indicate that more than 20,000 housing units in strategic housing developments are yet to be decided with another 8,000 delayed by judicial review. The planning structure still needs attention. Land taxes such as the Residential Zoned Land Tax and the Land Value Sharing contribution will create more obstacles to delivering development land of sufficient scale for large schemes.

We are also seeing more new homes being delivered in the outer suburbs of Dublin and in surrounding counties which can offer more affordable options for some purchasers. Encouragingly, we expect to see a higher number of properties coming to the market via the Affordable Purchase Scheme.

Will Coonan, director of Coonan Property

There appears to be plenty of demand out there. We have just launched the second phase of a development in Blessington, Co Wicklow, called Sorrel Wood and we experienced very keen interest levels in both the three- and four-bedroom homes, with all units selling out.

Demand appears to have remained robust despite the drags of last year’s interest rate hikes and continued geopolitical uncertainty due to the war in Ukraine; there continues to be a shortage of supply for the first-time buyer in particular.

The Government’s support with regard to incentives for these buyers, such as the move to extend the Help to Buy scheme to the end of 2025 and the implementation of the First Home scheme in summer 2022 are welcomed, as well as the grant available for vacant, derelict homes and for those looking to retrofit.

Along with the incentives in place, new-home purchasers are keen to purchase energy-efficient, A-rated homes, which now have green mortgage options with more attractive interest rates than older homes.

Frank McSharry, director of new homes at Lisney Sotheby’s International Realty

The new-homes market will remain busy with strong buyer sentiment outstripping supply. Elevated interest rates and banks adopting more risk-averse policies will be a feature, at least for the first half of the year. This will impact movers and investors but for first-time buyers, the increases will be somewhat offset by the higher loan-to-income (LTI) ratios that were introduced in January 2023.

The green credentials of new dwellings have greatly added to their attractiveness in the last two years and will continue to do so. Green mortgage interest rates are typically 30 basis points lower than non-green rates.

The median price of a new home in Dublin grew by almost €40,000 last year while second-hand homes grew by substantially less. While a large part of this discrepancy can be attributed to their green credentials, the various Government support measures for first-time buyers are also factors.

New-home starts and completions were strong last year despite the higher cost of building materials, labour and finance. Commencements nationwide were about 33,000 with close to 20,000 of these in the Greater Dublin Area; the highest level in 16 years. Completions are estimated to be at a similar level to 2022 of about 30,000 units. Interestingly, apartments nationwide will make up about one-third of the total – just five years ago this figure was as low as 12 per cent and in single digit percentages before that.