Number of new homes built will likely fall short of required demand in 2024

Happy New Year to all, it is difficult to believe that we are entering 2024. The new year  generally prompts a new look at the marketplace; 2023 was an interesting year with expected and unexpected challenges and opportunities. Based on the most recent data and forecasts, it looks like we can expect another year of nuanced industry dynamics.

As confirmed by the Central Statistics Office (CSO), inflation showed signs of easing last year, dropping in November to its lowest in over two years. This has been largely attributed to decreasing energy prices and a surge in mortgage interest rates, which peaked in August with a significant year-on-year increase. Running alongside that, house prices continued to increase in most regions, defying the expectations of many. In fact, the residential property index soared to unprecedented heights, surpassing levels seen only during the property boom of 2007. The average house price increased from €305,000 at the start of the year to €323,000 by October. This upward trend in house prices was paralleled by a boost in construction activity, particularly in Dublin. However, regions like Cork and Kerry saw a decline in new home construction, highlighting the regional disparities within the Irish market. The Northern and Western Regional Assembly has published repeated rounds of data to show how infrastructure deficits are hindering regional growth, however, little action has been taken to date, much to the frustration of homebuilders west of the Shannon. 

Looking ahead to 2024, predictions by a number of estate agents suggest that house prices will continue their upward climb, particularly in areas outside of Dublin (noting a marginal fall off in Offaly and Wicklow prices). The growth is fueled by demographic trends, the potential for falling interest rates, and a strong economic backdrop. Despite this optimistic outlook,  significant concern remains – the supply of new homes is still not keeping pace with demand. Estimates suggest that the number of new homes built will likely fall short of the required demand, exacerbating the existing housing shortage. The situation is particularly acute in social housing. In Cork City, for instance, over 1,100 social houses are currently stalled in the planning process, according to the Irish Examiner this week. However, there is a silver lining as the market heads towards stabilisation. According to the most recently published Daft.ie report, house prices are expected to stabilise in 2024. Interestingly, report author Ronan Lyons has attributed this to a matching of supply with the existing demand rather than an increase in housing availability. 

Looking towards the delivery side of the equation, construction is for robust growth, according to EY and Euroconstruct forecasts, with approximately 33,450 new homes to be completed in 2024. This figure outpaces most European counterparts and the growth is not limited to residential construction but extends to civil engineering and the non-residential sector, despite challenges such as rising interest rates and skill shortages.

The term ‘cautious optimism’ might best describe the sentiment within Lotus HQ today as we check in on existing projects supported all around the country and hear about the plans our clients have for 2024/2025.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group