Initiative Ireland has published its fifth annual housing report, entitled Housing 2022.
The report examines the continuing shortfall in supply, which has grown to 116,000 since 2017 alone. It notes that National Housing Targets if met, would still add a further 49,000 units to this shortfall. It examines the market implications of recent changes to the macro-prudential lending rules for would-be homebuyers, highlighting the disparity between cost of housing for renters versus cost of mortgages for owner-occupiers. It calls for radical reform of the planning system to deliver a 300% increase in unit approvals over the next 5 years, to gradually address the 116,000-housing shortfall which has steadily grown since 2017.
Key Report Findings include:
· There was a 40% increase in new dwellings built in 2022 with over 28,000 units delivered.
· Since 2017 only, the country has experienced a cumulative supply shortfall of ~116,000 units, including a ~16,000-unit (36%) shortfall in supply last year. This cumulative shortfall is the equivalent of 4 years of total housing supply for the country.
· Housing supply needs to increase to 40,000 units next year simply to maintain the status quo and avoid adding to the existing shortfall. In other words, a 40% increase in supply is needed to avoid a deepening of the housing crisis.
· Based on actual population growth and changes in household sizes, the National Housing Target to deliver 33,000 units per annum until 2030 will result in a further 49,000 units to the cumulative housing shortfall.
· To gradually address the 116,000-unit shortfall (which has built up since 2017), would require an increase in supply to ~48,000 units next year, increasing up to 73,000 units per annum over the next 5 years.
· The first step needed to address such a supply deficit, is a radical overhaul of the planning application process. Planning approvals would need to increase 300% steadily over the next 5 years to meet remedial supply levels needed to ease the housing crisis. As such significant changes are needed to increase the availability and viability of sites with full planning permission.
· Despite recent economic volatility, the average household purchase price has continued to steadily increase. With household income growth forecast to continue in 2023 and some significant reforms of the Central Bank Macro-Prudential Rules, the report anticipates continued price growth for first-time buyer homes but notes that this will be needed in some locations to enable construction.
· Comparing rental costs, mortgage costs and affordability across multiple new development sites, Initiative Ireland research indicates many households can reduce the cost of housing by 20%- 50% by switching from the rental market to mortgaging the same or even superior properties.
· While increases in cost of living, interest rate inflation and cost of construction will have impacts on the Irish Housing Market, the report does not forecast the same price or demand volatility which has been seen in other markets, due to unique economic factors including cumulative housing shortfall over the last decade, comparably high costs of rent and changes to the macro-prudential lending rules.
The Housing 2022 Report is available in full via InitiativeIreland.ie/publications
Launching the Report Padraig Rushe, Initiative Ireland CEO, said, “As an ESG Finance Company, we want to encourage honest and open debate around all of the factors which are contributing to the Housing and Cost of Living Crisis. In addition to measuring the supply of housing against new demand, it is essential we acknowledge the level cumulative shortfall which has built up in this country and the factors contributing to that shortfall.”
As an ESG Property Finance firm, Initiative Ireland provides capital to Private Property Developers and Approved Housing Bodies, to enable the construction energy-efficient social, affordable, and mass-market housing exclusively. With capacity to lend up to €300m per annum, the company focuses on financing developments from €1m to €20m to deliver family homes and apartments. The company also advocates for societal and environmental impact, through their publications and investment strategies, as a signatory of the UN Principles of Responsible Investing.
Sinead Byrne, Initiative Ireland COO said, “There has been a lot of uninformed speculation around the housing market recently. Anyone who does the research however can see that the Irish Residential Property market is underpinned by strong domestic housing demand. It is unique in Europe due to a decade of systemic undersupply as well as Ireland’s economic position.
Padraig Rushe, Initiative Ireland CEO, said, “While it is essential that we grow supply It isn’t simply a numbers game. We need the right housing, at the right price in the right locations. Provided we are mindful of those factors, we have a unique opportunity to improve access to housing and increase economic resilience over the next five years by tackling the housing crisis through planning and development initiatives