Estimates suggest that 10,000-12,000 fewer new houses will be built in Ireland in 2020 than had originally been anticipated.
The Covid-19 pandemic is set to have a “severe” impact on housing supply in 2020, according to a report by the Banking and Payments Federation of Ireland (BPFI).
Restrictions imposed to halt the spread of the virus will have a huge impact, according to the BPFI’s Chief Economist Dr Ali Ugur, who has forecast that there will be a shortfall of approximately 10,000-12,000 new houses in Ireland in 2020 compared to estimates before the pandemic hit.
Before Covid-19, it was estimated that 24,000-26,000 new housing units would be built in Ireland in 2020, with a revised forecast now suggesting that there are likely to be between 14,000-16,500 new units built this year.
The report also details, however, how demand for new housing units is likely to be more resilient amongst buyers with incomes typical among those seeking to build or buy new homes, who have been less affected by the impact of the pandemic.
“Workers with average gross earnings of more than €950 weekly or about €50,000 per annum account for just 14% of those receiving the PUP payment and 21% of those participating in the TWSS (Temporary Wage Subsidy Scheme) scheme,” Ugur said.
“Looking at these figures in the context of the mortgage market, it is earners in this same income bracket that account for the majority of those drawing down mortgages.”
Contrastingly, first-time buyers on incomes of less than €50,000 accounted for just 17% of first-time buyer drawdowns in 2019, with Ugur adding that “income losses during the pandemic may not have a significant effect on demand for mortgages from this cohort”.
Summarising the report, Ugur said: “While it is clear that the supply of new homes in 2020 will be less than what was estimated before the pandemic, it is also likely that demand for homes and mortgages may be lower than estimated due to uncertainty in the housing market and diminished consumer confidence.
“However, reduced demand due to lost or lower income levels is likely to depend on the pace of the wider economic recovery in 2020. Hence, as both supply of, and demand for, housing will be impacted negatively due to Covid-19, it is likely that changes in average prices will reflect supply and demand imbalances in the short term.”
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