Little cheer for first-time buyers in ESRI’s latest economic commentary
ESRI’s previous forecast of 23,500 house completions ‘unlikely’ due to slowdown
The ESRI says that up to 35,000 units need to be built each year for supply to meet demand. Photograph: Simon Dawson/Bloomberg via Getty Images
There is little cheer in the ESRI’s latest quarterly economic commentary for those hoping to get on the property ladder.
According to the ESRI, the slowdown in the growth rate of house completions in the second quarter of this year means it is “unlikely” that its previous forecast of 23,500 would be reached.
Consequently, the ESRI has moderated its forecast for this year to 21,000 units, still well below the level required for supply to meet expected demand. Next year, the ESRI expects the number of units built to hit 25,000 although this comes with a major caveat.
“Should any adverse economic shock occur, for example from a hard Brexit, this may further slow completions next year,” the ESRI states.
The ESRI says that up to 35,000 units need to be built each year for supply to meet demand although Trinity College economist Ronan Lyons, who works with property website Daft.ie, has said the number is closer to 50,000.
These numbers are important in the context of whether or not the Government should extend the Help to Buy scheme for first-time buyers, which is due to expire at the end of this year having being put in place in 2014.
Earlier this year, Minister for Finance Paschal Donohoe put the full-year cost of extending the scheme at €50 million. He will announce his decision in the budget on October 8th.
House price growth has also moderated this year, leading to calls from some quarters for the Central Bank of Ireland to relax the macroprudential rules on mortgage lending. This is one of the first major decisions that new governor Gabriel Makhlouf will have to make, with the regulator completing its annual review of the rules.
Perhaps not surprisingly, the ESRI said it is “imperative that these measures are maintained in such a manner to prevent the emergence of another house price-mortgage credit feedback loop”. We’ll have to wait until November for Makhlouf’s decision on that one.