The huge demand for new homes is driven largely by prospective first-time buyers, who are limited to new-builds if they wish to avail of the State’s financial-aid schemes, which many rely upon to escape the rental cycle.
“Entry-level homes, especially those which qualify for the Help-to-Buy (HTB) scheme and the First-Home scheme, have continued to prove popular,” says Gemma Lanigan, partner at DNG. “Both incentives are attractive to those struggling to save up for the deposit while paying rent.”
“First-time buyers have made up 50 per cent of the new homes market in Dublin and Cork in the last six years,” says Frank McSharry, divisional director of new homes at Lisney Sotheby’s International Realty. “However, recently, this proportion has risen to more than 60 per cent, partially due to the State’s support schemes, but also due to the increases in loan-to-income mortgage ratios.”
Describing sales of new homes as “robust”, Ivan Gaine, managing director of Sherry FitzGerald New Homes and chairperson of Property Industry Ireland says, demand for such properties is “massively outpacing supply”.
[ New home schemes in Dublin, Kildare, Cork, Wicklow, Louth and WestmeathOpens in new window ]
He points to the current statistics on State assistance schemes, which show those who receive aid are far fewer than those who apply for it due to a shortage in supply of eligible properties.
So far this year 23,635 applications have been submitted to the HTB scheme, he says, while only 4,771 claims have been made.
“At many of our [new development] launches we are seeing a similar ratio of four to five times the demand for the number of houses available,” says Gaine.
“Strong population growth ensures that demand is set to remain very strong for the medium to long term,” says Ray Palmer-Smith, director of new homes at Knight Frank, “therefore, much more needs to be done to ensure that the delivery of supply is accelerated.”
Judy Sorohan, director of new homes at Hooke & MacDonald, and Palmer-Smith also point to high levels of employment for the perceived confidence in the new homes market.
In terms of the type of new homes that attract the highest demand, Sarah Murray, incoming director of new homes at Savills, says “traditional housing” – ie terraced, semidetached and detached houses – are popular as well as own-door duplex apartments. “Conventional apartments in well-located areas” are also selling well, she says, and sales of such properties are likely to increase into 2024 with the first Croí Cónaithe apartments being offered for sale.” (The Croí Cónaithe Cities scheme is a fund to support the building of apartments for sale to owner-occupiers.)
Supply
“A well-versed problem continues to be a shortage of housing across all categories of homes and it comes as no surprise that the new homes market is experiencing a busy 2023 so far, with strong activity expected for the rest of the year and into 2024,” says Palmer-Smith.
“The fact that housing completions reached just over 29,000 in 2022 and, with a push from all quarters, may reach that again this year, is also helping activity and making a small step to bridging the gap between the strong level of demand and the low levels of supply,” he adds.
Although Will Coonan, director of Coonan Property, expects demand for new homes to continue, he says he agrees with a “general consensus that there will be a stock deficit of new homes in the market”.
“Some indicators are showing that new developments may be starting to dry up,” he says, “and housing starts will slow due to the planning process”.
“Completions for 2023 should be up at just over 30,000 units for the calendar year but figures from the Central Statistics Office show that just under 7,400 units were completed between April and June of this year, down 3.5 per cent on the same period last year.
“This was due to an almost 19-per-cent drop in apartment completions, according to the Banking and Payments Federation,” he says.
“The problems experienced by our planning system are creating huge delays, as well as issues surrounding viability and local – as well as some not so local – oppositions only further add to the lengthy time taken from acquiring land to actually having completed properties ready for occupation built on it,” says Sorohan.
“Planning reform is ongoing with two planning and development bills [the Planning and Development (Amendment) Bill 2023 and the Land Value Sharing and Urban Development Zones Bill 2022] potentially to be enacted by the end of the year and the very recent publication of Draft Guidelines for Sustainable and Compact Settlements, which should allow for more affordable, sustainable and viable own-door housing schemes in future years, subject to a functional planning system,” according to Gaine.
Also affecting supply is what Murray refers to as a “new homes premium”, which, she says, continues to grow “as inflation on construction materials and the high cost of building contractors deters buyers from opting for [second-hand] homes that require modernisation or refurbishment”.
On the other hand, Lanigan points to an increase in the supply arriving on the open market of new apartments that would previously have been bought by private investors.
Developments in Dublin, Kildare, Wicklow and Meath are experiencing very high demand, says Sorohan, and “delivering properties in these locations within the price thresholds for [assistance schemes] is very difficult due to the continued rise in the cost of materials and other viability concerns”.
Palmer-Smith also points to an increase in the supply of and demand for homes outside the Greater Dublin Area, providing Kilkenny, Athlone and Portlaoise as examples.
There will be limited scope for price growth in the new homes sector over the next 12 to 18 months, says McSharry, as “potential buyers will continue to face affordability constraints due to the economy and higher mortgage repayments”.
“Given the market dynamics, many developers – particularly larger players – may look towards bulk sales of entire schemes to Government-backed purchasers such as approved housing bodies and the Land Development Agency (LDA). This will further reduce the number of new homes available to the private market,” he adds.
“Mortgage interest rates have become a hot topic,” says Lanigan, “with buyers seeking to fix in at the keenest interest rate available at the time of booking.”
“The continued increase in interest rates, as well as banks adopting more risk-averse policies – such as seeking greater levels of information and documentation from borrowers and delaying loan offers – have had a negative impact on the market in recent months,” McSharry notes.
“This has especially affected movers and investors but for first-time buyers, the increases have been somewhat offset by the increase to loan-to-income ratios in January, rising to four times the gross household income from 3.5 times the income.”
[ How to buy your first home in Ireland: The three hurdles to overcomeOpens in new window ]
“Another attraction for the market is the fact that second-time buyers no longer have to put up a 20 per cent deposit,” says Coonan. “With a loan-to-value of 90 per cent now on the table, these purchasers are less restricted and some of them will enter the new homes market.”
Agents also note the “attractive interest rates” offered by green mortgages for energy-efficient homes as an incentive for buyers to buy new.
“Green mortgage interest rates are typically 30 basis points lower than non-green rates, which could result in a saving of up to €100 per month on repayments,” says McSharry.
