The current state of the housing pipeline indicates that some 27,000 new homes will be completed in 2023, which would represent a notable decline from close to 30,000 completions last year, according to the Banking & Payments Federation Ireland (BPFI).
The latest housing market monitor from the banking sector group shows that "robust" housing supply and mortgage demand will support this market this year.
Downside risks remain to both supply and demand due to cost pressures associated with inflation and interest rate increases, which could ultimately stymie construction activity while demand for housing still far outstrips supply.
A recent report found that 40,000 new homes would be required to prevent the shortfall in housing growing further. House prices increased 7.8% in 2022, with the median average price for a residential property purchased last year rising to €305,000.
Brian Hayes, CEO of the BPFI, said that housing completions rose 45% from 2021 and 41% from 2019 last year, with commencement figures suggesting a further 27,000 units will be delivered in 2023, which would be in line with pre-pandemic levels.
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"Commencements figures for January 2023 are also encouraging, with 2,108 housing units started during the month, the highest level observed in any January period since 2008," he added.
Some 52,634 mortgages worth a combined €14.1bn were drawn down in 2022, the highest level of drawdowns since 2008, and switching activity doubled, accounting for 28% of drawdowns, up from 14% in 2021.
"Looking at mortgage approvals activity, which is useful as a forward-looking indicator, our most recent approvals figures for January 2023 show that approvals were valued at €1bn, of which first-time buyers (FTBs) accounted for over 51%," Hayes continued.
"While the volume of non-purchase mortgages (switching and top-ups) increased by 2.1%, this represents a significant slowdown from previous periods.”
The latest data from the Help to Buy scheme shows there were 7,000 applications in January, an increase of 36% year-on-year, and larger than the total number of claims in the whole of 2022 (6,922).
Hayes warned that housing and mortgage activity could be constrained by cost pressures and rising interest rates, with the European Central Bank due to increase rates by a further 0.5% this week.
The BPFI has forecast that growth in non-purchase mortgages will slow while first-time buyers drive activity due to measures like Help to Buy, the First Home Scheme and the easing of lending rules.
"And while the slowdown in residential property price inflation should help to alleviate affordability concerns somewhat, especially for first-time buyers, building cost pressures and further ECB rate increases may pose some risk to the housing supply outlook and mortgage demand in the short to medium term," Hayes said.
(Pic: Getty Images)
