As with other sectors, the new homes market has been adversely affected by the pandemic lockdowns.
The latest one will begin to lift on April 12th allowing developers to get back on site.
The demand for housing, which was already considerably in excess of annual supply delivery, has intensified in the last year. Key historical drivers of demand such as population growth, which has been the engine of demand in Ireland for the last decade, have been compounded by increased momentum from buyers whose jobs in sectors such as technology, media and telecom, finance and pharmaceuticals have been largely unaffected by the pandemic.
Additional savings as well as the Government’s enhanced help-to-buy scheme have also added to supply pressures, the combined impact resulting in upward pressure on prices, with a risk of further increases in 2021 and 2022.
Knight Frank Ireland carried out a survey of developers to assess the impact the Covid-19 crisis has had on their decisions, output and plans for the future, with 54 per cent reporting weaker construction activity in 2020, compared to 2019.
The total number of housing units completed in 2020 was 20,676 – relatively strong considering the lockdown and more difficult working conditions on sites, but still well below the estimated 35,000 units a year required to meet demand.
Over the last year, 64 per cent of construction projects were delayed by between four and six months, while 18 per cent were delayed by less than three months, with the remaining 18 per cent of projects delayed by between seven and 12 months.
Skills shortages have also intensified, with 57 per cent of developers seeing this as a bigger problem over the last 12 months.
While sourcing development finance has also been more difficult, it has not deterred developers from seeking sites, applying for planning permissions and pushing ahead with projects.
Of those surveyed, 77 per cent did not delay applying for planning for new projects, while 82 per cent believe Covid-19 will bring about changes to the way new homes are designed. Working from home spaces and garden pods are potentially on the list for new houses, while working from home spaces are a top priority for new apartments.
Overall, developers, while taking a more cautious approach to new plans, have consolidated and are moving forward with existing plans (82 per cent aim to add to their existing land banks in 2021) and remain optimistic about activity in 2021 as sites reopen. A small majority, 59 per cent, believe 2021 will see stronger activity than in 2020.
The proverbial elephants in the room that constrained the industry pre-Covid-19 remain however, with the cost of construction topping the list of developers’ concerns. The manner in which the planning process operates along with a lack of available sites suitable to develop quickly continue to be major issues that need to be addressed to allow supply to catch up with demand over the coming years.
Joan Henry is chief economist and head of research at Knight Frank