As many as 47,000 houses will have to be built each year for the next five years just to meet demand, according to a new report.
This is almost twice the 25,000 target set out in the Government's Project Ireland 2040 plan and more than twice the current level of supply, which was 21,000 last year.That figure is expected to fall to between 14,000 and 16,500 this year amid Covid-19 disruption.
The analysis by property economist Ronan Lyons and industry body Irish Institutional Property (IIP) suggests the main drivers of housing demand in the coming years will be the natural increase in population, net migration and changes in household size.
It estimated that 30,000 homes a year are needed to meet the likely population changes alone.
The bulk of new homes are needed for smaller households and in locations that are in and near the main cities.
The overwhelming evidence from both sale and rental markets in Dublin is that availability is “the key determinant of price”, the report says.
Since the 2008 financial crash, supply of all forms has been inadequate and recent improvements still fall short of underlying demand, it finds.
The report also claims that the supply of new homes is determined by viability – effectively the cost of construction – and not affordability for buyers and that viability is “extremely challenging”, particularly for apartments.
It says two-bedroom apartments in Dublin now cost up to €460,000 to build when land, VAT and levies are added to the traditional bricks and mortar construction costs.
The report says the Government should take steps to tackle affordability gap for prospective buyers.
Cost-rental schemes
It says Government housing policy should provide for cost-rental schemes, where costs are shared with the taxpayer for households with low incomes.
The authors also call for the introduction of new shared-equity and share-ownership schemes which it says would enable thousands of aspiring homeowners, currently shut out of the housing market, to bridge the affordability gap.
“The mix of new housing supply in recent years in this country has been inadequate. New homes are increasingly out of sync with Ireland’s household structure,” Mr Lyons of Identify Consulting and Trinity College, and author of the study said.
“Ireland’s housing is out of line not only with its own demographics, but also compared to all other European countries, where typically 50 per cent of dwellings are apartments,” he said.
“ The main drivers for housing demand in the years to come will be the natural increase in population, net migration and changes in household size. The Government must address these issues now by taking steps that will ensure we have the right homes in the right locations,” he added.
Mr Lyons also noted that shared-equity schemes were cheaper than the Government’s help to buy initiative as the State maintains a financial interest in the property.
