The Irish banking lobby group has joined the Central Bank in forecasting this week the Government will miss its near-term house-building targets.
Banking and Payments Federation Ireland (BPFI) estimates in a new report that about 75,000 housing units could be completed between this year and next, based on commencement activity.
However, it said “inefficiencies” in the areas of land serviced by critical infrastructure, productivity in a labour-intensive sector, and funding of developments “will need to be addressed to provide significantly more homes in the short term”.
The BPFI estimate is in line with projections earlier this week from the Central Bank, which sees 35,000 new homes being completed in 2025, up from 30,330 last year, before rising to 40,000 in 2026. The Government has set itself a target of delivering 41,000 this year and 43,000 in 2026 – a total of 84,000. It is aiming for 300,000 homes to be built by the end of the decade.
“Challenges in relation to supply of new housing is not unique to Ireland with other developed economies experiencing similar problems, particularly since the pandemic,” said BPFI chief executive Brian Hayes. “However, the success of the Irish economy has exacerbated the challenge in Ireland with significant income, employment and population growth in the past decade.”
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While construction on 69,000 new homes officially commenced last year – exceeding the total for previous two years combined – the BPFI estimates at least half were down to builders seeking to meet deadlines for eligibility for a development levy waiver and refund on water connection charges. To fully qualify for both initiatives, however, the homes would need to be completed by the end of 2026.
“We believe that the completion date for the units commenced last year, as well as some of the commencements from the end of 2023, will span the two-year period of 2025 and 2026, and hence we forecast a total housing output of around 75,000 units in the next two years,” said Mr Hayes.
“We expect a significant increase in output, particularly in the first half of this year but to reach the output levels required to meet demand, key labour, land and capital issues will need to be addressed.”
The BPFI said there are increasing signs of delays in securing utility connections such as water and electricity for new projects, with Irish Water stating that under current capacity it can connect only 35,000 new homes a year to the network, with further investment required to increase capacity.
The lobby group said that Irish banks are already providing significant finance to the housing market, but that this could be further boosted “by way of risk sharing with the State, which is not uncommon in other jurisdictions in order to crowd in other private investors”.
The BPFI has been arguing in recent times that the Government should set up a credit guarantee scheme to help small to medium-sized builders with insufficient equity to secure necessary finance to increase output – without compromising banks’ loan underwriting standards.
The Central Bank said in its latest quarterly economic bulletin this week that in order to “unlock” housing there needs to be a “more investable and sustainable construction sector, where housing that is affordable for renters and buyers alike is delivered at viable cost”.
“Making residential development a more investable sector can be facilitated by incentivising more productivity, scale and modern methods of construction in the sector, incentivising the most active use of available land for residential purposes and maximising the available land for residential construction through adequate public infrastructure delivery and a more effective planning regime, especially in urban areas,” it said.
