Developers had warned that higher interest rates, rising costs and a shortage of builders would lead to a fall-off in building this year, but increasing Government supports are having an impactNew house prices this year are running 11% ahead of 2022 levels, while second-hand prices are pretty much unchanged. Much of this is down to State support. Photograph: Bloombergmarket. And it is having an impact. A host of data published this week tells the story.
The new homes market remains in its own bubble. As well as supports for demand, a string of new schemes to promote housing supply are also rolling out. So for developers supply is being part-underwritten and demand for houses is being supported. Many developers had warned that higher interest rates, rising costs and a shortage of builders would lead to a fall-off in building this year as a “viability gap” emerged.
This does not mean that all its policies are ideal. The risk with demand supports, and particularly the Help-to-Buy scheme — which offers a tax refund to help with the deposit — is that they push up prices, meaning a lot of the cash is effectively a transfer from the taxpayer to developers.
And the supports — as well as the strong jobs market and rising incomes — are having an impact, along with the 2022 changes in lending rules allowing first-time buyers to borrow four times their income. The latest figures from Banking and Payments Federation Ireland show that on average 470 first-time buyer mortgages valued at €131 million have been drawn down each week in the first nine months of 2023 — that means €5.1 billion in cash has been out in the market looking for something to buy.
The Coalition will argue that its mix of measures is increasing supply and first-time buyer activity while being quietly happy that house prices are not actually falling, which might upset much of its base. Sinn Féin says that more State cash is needed for building — and that lower house prices are part of the answer. Behind this lies a generational question that both sides have to contend with.