The organisation that represents the main retail banks says that upward pressure on house prices is set to remain unless there is a “substantial” increase in supply.
Banking & Payments Federation Ireland (BPFI) was commenting after the release of its latest Housing Market Monitor for the third quarter of 2022.
The report referred to Eurostat figures showing that average rents in Ireland jumped by 82% between 2010 and the second quarter of this year, compared with an average increase of 18% in the EU.
The rise in house prices over the same period was 55%, slightly higher than the EU average of 50%.
‘Resilient’ demand
The report also showed that, while increases in house prices had slowed in the three-month period, construction of new houses had also weakened.
BPFI described demand for housing as “resilient”, driven by population growth and pent-up demand, and exacerbated by what it called “the significant gap” between average rent and mortgage payments.
The organisation said that average first-time buyer monthly mortgage payment was just over €1,000 during the first half of 2021, compared with the average monthly rent of over €1,400 at the national level.
BPFI chief executive Brian Hayes said that this gap was likely to balance the negative impact of inflation and economic uncertainty on mortgage demand.
Supply ‘lags population growth’
The organisation said that housing starts had declined compared with the third quarter of 2021, and that supply continued to lag population growth.
“Commencement activity seems to be declining on an annual rolling basis, after peaking at 35,000 units during the first quarter of 2022, to some 26,600 units in October 2022,” said Hayes.
He cited Census figures showing that, between 2016 and 2022, the housing stock increased by over 120,000, whereas population growth during the same period was over 360,000.
“More significantly, between 2011 and 2022, the population in Ireland increased by over half a million people, whereas housing output grew by only 130,000 units,” Hayes continued.