Construction revival may mean up to 27,000 homes built next year

A faster than expected recovery in construction is set to be marked by 22,000 homes built this year and up to 27,000 next year, according to the Banking and Payments Federation Ireland (BPFI).

The increased level of output, it said, was being matched by increased mortgage demand.

The group’s latest report on the housing sector here also highlighted a shift in construction activity away from the capital to other regions, especially the Dublin commuter belt, in the wake of the pandemic.

It comes on the same day as the Government is expected to publish its much-anticipated housing for all strategy document, which is expected to promise increased funding for housing projects as well as new initiatives to bolster affordability.

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In its report, the BPFI said there were 8,955 housing units completed in the first half of 2021 despite the restrictions around construction at the start of the year.

This was 10 per cent higher than the number of completions in the first half of 2020.

If the sector continues to build at a rate similar to second half of 2020, it is likely that total completions this year can reach 22,000 units, it said.

The Central Bank of Ireland and others had forecast housing completions of 20,000 this year.

On basis of commencement notices, the BPFI also said it expected completions of 25,000 to 27,000 in 2022, which would be the highest level of output since before the 2008 financial crisis and closer to the Government’s annual housing output target of 35,000.

In its report, the BPFI also highlighted a commensurate pick-up in mortgage approvals.

The total number of approvals in the first seven months of 2021 were 30,611 with a total value of about €7.6 billion compared to €4.7 billion a year earlier and €6.6 billion during the same period in 2019, prior to the pandemic.

Housing demand was being boosted by the Government’s help-to-buy scheme with some 26,000 applications received in the first seven months of 2021.

Housing activity is increasing significantly with “a healthy pipeline of housing supply and mortgage demand pointing to strong growth potential”, it said.

The report also highlighted a shift in construction activity away from Dublin to the commuter region in particular. The completion figures showed that Dublin accounted for about 28 per cent of all house completions in the first half of 2021, but this share has been declining since 2017 when it was 39 per cent.

The capital, however, continues to have the most apartment completions – accounting for about 68 per cent of all such units at national level.

New properties

The shift in construction activity outside Dublin is also evident in the sale of new properties, where about 36 per cent of transactions in the Dublin commuter region during the first half of 2021 were for new properties, compared with about 25 per cent in 2011, it said.

In its report, the BPFI noted that residential property price inflation accelerated again to 6.9 per cent in the year to June, compared with no change in the year to June 2020.

Speaking on the latest trends highlighted in the report, BPFI chief executive Brian Hayes said: "In terms of overall housing activity, notwithstanding the negative effects of the pandemic, we see that activity levels are increasing significantly.

“The recovery of the residential construction sector continued with the removal of pandemic-related restrictions on activity in the sector from May 2021.

“Commencement levels were also severely affected during the initial period of the pandemic. But, on an annualised basis, almost 27,300 units were commenced in the12 months ending June 2021, the most in any 12-month period since the 12 months ending October 2008, which is likely to increase the number of completions significantly in 2022.”