Increasing housing supply has moderated price rises but affordability challenges remain – BPFI Housing Market Monitor
- Annual housing price inflation declining since peak at over 15% in March 2022
- 6,716 new completions in the first quarter of 2023, the most seen in any first quarter since 2011
- Percentage of solo FTB applicants buying or building a new home remained stable between 2019-2022 although average property prices increased by almost 26% in the same period
- Regional differences remain in self-build mortgages which accounted for around 3% of FTB drawdowns on new properties in Dublin in 2022 but 74% in the South and Mid-West
Tuesday 20th June 2023 – The latest Housing Market Monitor Q1 2023 published today by Banking & Payments Federation Ireland (BPFI) shows that increasing housing supply has moderated price rises, with figures indicating that annual housing price inflation has been declining since its peak at over 15% in March 2022. However, affordability challenges remain with property prices nationally more than doubling from their low in early 2013.
Outlining the key finding from the monitor, Ali Ugur, Chief Economist of BPFI stated: “Current indicators show that house building activity remains robust with completions and commencements at record levels. There were 6,716 new completions in the first quarter of 2023, a 19.1% increase from the first quarter of 2022 and the most completions seen in any first quarter since the data series started in 2011. This increased supply should provide better affordability for potential home buyers as average prices start to moderate but as of April 2023 average national prices were 1.7% higher than their highest level observed in 2007 and property prices nationally have increased by over 127% from their low in early 2013.”
Higher housing prices reflected in bigger loans and higher borrower incomes
“However, as housing prices have risen so too have borrower incomes. BPFI mortgage data shows for example, that the percentage of solo first-time buyer (FTB) applicants buying or building a new home remained stable between 2019-2022, notwithstanding the fact that average property prices increased by almost 26% in the same period. This is mainly due to increases in the average incomes of borrowers, from €59,000 in 2019 to €67,000 in 2022 for solo FTB applicants. Similarly, increases in average prices over the period contributed to higher loan values.”
Housing trends robust but regional differences remain as rural regions rely on self-builds
“While we are seeing positive trends across the housing market, regional differences remain with average prices in Dublin 9.1% lower than the peak in 2007 but 2.5% higher in the rest of Ireland. We also see rural locations relying more on self-build units over housing schemes and apartment developments. While FTB self-build mortgages accounted for around 3% of FTB mortgage drawdowns on new properties in Dublin in 2022, in the South and Mid-West, nearly 74% of FTB drawdowns on new properties were for self builds.”
Mr Ugur concluded: “Overall, the increase in supply of housing is beginning to ease the growth in property prices. At the same time, existing and further cost pressures such as increased building and labour costs, as well as the changing interest rate environment, could affect the viability of some of the housing projects currently planned, particularly in the institutional investor market, which could affect output in 2024 and beyond.”
Note: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland. Together with its affiliates, the Federation of International Banks in Ireland, and the Fintech & Payments Association of Ireland, BPFI has over 125 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.