Housing starts now back at Celtic Tiger levels

Sherry FitzGerald anticipates sizeable rise in construction output

Sherry FitzGerald says  more than 30,700 new residential units were commenced in 2021, representing a 41.7% increase on 2020. Photograph:  Rui Vieira/PA Wire

Sherry FitzGerald says more than 30,700 new residential units were commenced in 2021, representing a 41.7% increase on 2020. Photograph: Rui Vieira/PA Wire

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Housing starts are now back at Celtic Tiger levels, with Dublin and the mid-east region seeing the biggest pick-up in activity, according to estate agent Sherry FitzGerald.

In its annual review of the housing market, the company noted that more than 30,700 new residential units were commenced in 2021, representing a 41.7 per cent increase on 2020 and a 17 per cent rise on 2019. It was also the strongest level of commencement activity seen in the State since 2007.

Dublin and the mid-east regions accounted for 61 per cent or 18,700 of commencements.

“A sizeable rise in construction output is anticipated following the upturn in commencement activity seen in 2021,” Sherry FitzGerald economist Eoin Lynch said.

However, he cautioned the likely increase in supply will be insufficient to meet current demand, estimated to be around 35,000 units. “As a result, further price inflation is likely in 2022, albeit at a reduced rate compared to 2021,” he said.

Sherry FitzGerald is forecasting house price inflation nationally of 6-8 per cent this year. Price growth in Dublin would be moderate at 4-5 per cent,

In the report Mr Lynch highlighted “significant divergence” in price trends between Dublin and the rest of the country. “This reflects the more binding nature of the macro-prudential rules in locations where average values are higher,” he said.

Sherry FitzGerald said the second-hand market remains robust with sales in 2021 38 per cent stronger than 2020, while trading at the high-value end of the market had been particularly strong during the pandemic.

“While all price categories have noted an increase in sales compared to the same period in 2020, this growth is much stronger at higher values,” Mr Lynch said.

Prior to the pandemic sales at the upper end of the market were restrained as unease surrounding Brexit curbed activity.

Brexit

“The combination of compressed sales levels and an assuaging of fears surrounding Brexit have allowed for greater growth to occur,” Mr Lynch said. “Furthermore, price inflation, higher savings making the macroprudential rules less binding, and the increased desire for space as a result of the pandemic meaning people are willing to spend more than previously have also contributed to stronger sales growth at higher price levels.”

Owner occupiers remained the most active purchasing cohort in the market in 2021, it said, representing 79 per cent of all second-hand home purchases made through Sherry FitzGerald in the year, with first-time buyers comprising over half of all owner occupiers.

The company also highlighted what it said was the ongoing “ exodus of landlords from the rental market”, with just 13 per cent of purchases made by investors while 32 per cent of all sales were investors selling their properties, “signalling a huge disparity between those entering and exiting the market”.