Home Directory Banking and Payments Federation Ireland (BPFI) Lower costs and better coordination needed to deliver affordable housing – BPFI Housing Market Monitor

Lower costs and better coordination needed to deliver affordable housing – BPFI Housing Market Monitor

The latest Housing Market Monitor Q4 2019 published today by Banking & Payments Federation Ireland (BPFI) shows that, even as housing supply increases, substantial affordability issues remain that should be addressed by reducing prices as well as enhancing households’ capacity to borrow.

The Monitor also points to increased activity across key indicators including housing supply and mortgage activity.

Drawing on BPFI data as well as a range of other published research for its assessment of the current state of the housing market, the latest BPFI Housing Market Monitor draws attention to some key findings as follows:

  • Housing supply in Ireland increased from around 5,000 units in 2012 to over 21,000 units by the end of 2019 and is likely to reach around 25,000 units by the end of 2020.
  • Planning permissions data show that there is a robust pipeline of new activity with more than 30,000 estimated units granted planning permission in 2019.
  • Irish mortgage activity continued to grow in 2019, with approvals up 9% to 49,000 and drawdowns up 4% to almost 43,000. Much of the growth was driven by first-time buyers (FTBs) who accounted for around 51% of the value of mortgage drawdowns in 2018, up from 21% in 2006 when drawdown activity was at its peak.

Commenting on the latest trends, Dr Ali Ugur, Chief Economist, BPFI, explains that despite substantial increases in housing prices in recent years and some positive signs in relation to housebuilding, supply has not responded as hoped. This pattern has been replicated in other markets.

“Basic laws of supply and demand in economics show that, when housing demand outpaces supply, prices go up. In theory supply should increase in response to that demand and prices stop increasing. At a global level the housing market has not followed this pattern in many countries where rents and housing prices have risen but supply has not rebounded to the levels required.”

Growing housing supply seems to be bringing some stability to residential property prices but evidence from mortgage data suggest that FTBs are paying much higher prices, on average, for new properties than for second-hand properties. The average mortgage drawdown value for an FTB buying a new property was more than €261,000 in Q4 2019, almost €52,000 more than the average FTB drawdown on second-hand properties. This contrasted with the pattern in the peak lending period of up to 2008, when the average FTB drawdown for a second-hand property was higher than that for a new property.


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