Irish Housing Supply Gap Widens Despite Construction Uptick: Weekly Client Briefing

According to the latest data from MyHome.ie, the supply of second-hand homes for sale has dramatically decreased over the past decade. In July 2024, there were only 12,477 such properties available, a stark 50 percent reduction from the 24,750 listed in July 2014. This decline is even more pronounced outside of Dublin, with Munster experiencing a 61 percent drop, Connacht and the border counties seeing a 59 percent decrease, and Leinster facing a 36 percent decline. These figures, as reported by RTE, point to the severe supply constraints in the market, particularly in regions outside the capital.

Despite these supply challenges, there are encouraging signs in new construction activity. The GeoDirectory Residential Buildings Report, as reported in the Irish Examiner this week, reveals that 31,384 new residential address points were recorded in the twelve months leading to June 2024. A further 21,851 homes are currently under construction across the country. Dublin and Cork are leading this construction activity, accounting for a significant portion of ongoing building projects. However, the report also highlights regional disparities, with counties like Sligo, Roscommon, Leitrim, and Longford seeing fewer than 200 buildings under construction each.

The government’s ambitious target of 50,000 new housing units per annum has undoubtedly bolstered confidence in the construction sector. This, coupled with demand-stimulating initiatives such as the First Home Scheme and Help-to-Buy Scheme, has created a supportive environment for homebuilders. However, as John McCartney, director and head of research at BNP Paribas Real Estate Ireland, cautioned in a recent survey, increased construction activity may not necessarily translate to immediate increases in housing completions within the current calendar year.

The persistent imbalance between supply and demand continues to drive house prices upward. The GeoDirectory report shows that average house prices rose in nearly every county, with the national average reaching €381,749. This trend is further corroborated by the CSO’s Residential Property Price Index, which recorded an 8.2 percent increase in the 12 months to the end of May 2024 – the highest rate since November 2022. However, this price growth may be impacting market dynamics, as evidenced by a 5.8 percent year-on-year decrease in residential property transactions reported by GeoDirectory.

One particularly noteworthy aspect of the current market, highlighted in the GeoDirectory report, is the relationship between rents and mortgage repayments. In several urban areas, including Dublin City, Fingal, South Dublin, and Cork City, average monthly market rents now exceed average monthly mortgage repayments for new dwellings. This situation may be trapping potential homebuyers in the rental market, as they struggle to save for deposits while paying high rents. For homebuilders, these market conditions present both opportunities and challenges. The severe supply shortage, particularly outside Dublin, offers significant potential for new developments in locations previously unconsidered. However, project owners must navigate issues such as stubbornly high input prices, the need to balance affordability with profitability, and the possibility of market shifts if interest rates decrease.

For more area-specific data for your next development project, contact me or any of the Lotus team.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group