New home completions in Ireland are forecast to rise to 37,000 by 2026, exceeding the Government’s target, as a contraction in commercial real estate facilitates further expansion in residential housing, according to the Central Bank of Ireland.
“There is tentative evidence that previous labour supply constraints in the residential sector are no longer as binding as commercial construction has slowed, with some transfer of labour,” the bank said in its latest quarterly economic bulletin.
The additional manpower combined with a pickup in housing commencements would see new home completions rise to 35,000 this year, up from just under 33,000 last year, and to 36,500 and 37,000 in 2025 and 2026 respectively. The completion numbers were “conditional on limited delays in the planning system and improved connection times to utilities,” it said.
The Government’s Housing for All strategy targets 34,600 completions this year, 36,100 in 2025 and 36,900 in 2026.
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While good news for the Government, the Central Bank’s forecasts appear to clash with the BNP Paribas’s latest data for the construction sector here, which pointed to a slump in residential activity in February. The head of research at BNP Paribas Real Estate Ireland, John McCartney, said the rapid rise in home completions could “stall a bit in 2024” putting the Government’s target for the year “at risk”.
In its report, the Central Bank said the best guide to housing completions was commencements and these were running at an annual rate of over 34,000 units in January this year.
“Significant potential residential investment is also illustrated by the gap between planning permissions and commencements. Over 58,000 cumulative planning permissions granted since 2019 have not yet progressed to commencement stage,” it said.
In its bulletin, the Central Bank predicted the economy would grow by a modest but stable 2 per cent this year and by 1.9 per cent in 2024 in terms of modified domestic demand, which gives a more accurate read on the domestic economy.
GDP (gross domestic demand), which contracted by more than 3 per cent last year on the back of a fall-off in multinational exports, placing the Irish economy in a technical recession, is also expected to recover this year, rising by 2.8 per cent as inflation softens globally and restrictive monetary policy in the form of higher interest rates eases.
[ Housing commencements hit new post-boom record in JanuaryOpens in new window ]
However, Robert Kelly, the Central Bank’s director of economics and statistics, warned that “global headwinds and domestic capacity constraints” would impact the growth of the Irish economy in the medium term.
He also noted that risks to the growth outlook were tilted to the downside.
“Several risks, if realised, could cause the economy to deviate from the current projected path of stable growth and lower inflation,” Mr Kelly said.
These risks included another energy price shock linked to ongoing geopolitical tensions in the Middle East; a more protracted period of low growth in the global economy, which damage exports; and increases in labour costs above productivity, which the bank said “could generate excessive domestic inflationary pressures.”
“Delayed progress in addressing capacity constraints in housing and other infrastructure could generate higher and more persistent price and wage inflation and damage competitiveness,” it said.
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