Land, capital and labour issues must be addressed to increase housing output in the short term – BPFI Housing Market Monitor
- Around 75,000 housing units could be completed over the next two years
- At least half of commencements in 2024 were due to uncertainty over extension of development levy waiver or water connection charge refund
- About 95,000 apartments were given planning permission between 2018 and 2022 but only 44,000 apartments were completed between 2018 and 2024
Friday 21st March 2025 – The latest Housing Market Monitor Q4 2024, published today by Banking & Payments Federation Ireland (BPFI), shows that around 75,000 housing units could be completed in the next two years, based on commencement activity, but inefficiencies in the system relating to land, capital and labour issues will need to be addressed to provide significantly more homes in the short term.
Mixed signals in construction activity data
Outlining the key findings from the monitor, Brian Hayes, Chief Executive of BPFI stated: “Today’s report shows that while there was a 6.7% decline in housing completions in 2024, solely driven by the fall in the level of apartment completions, more than 69,000 new homes commenced in 2024, more than the total number of homes started in 2022 and 2023 combined. Some 43% of those housing starts were apartments. However, we estimate that at least half of the total number of homes commenced during 2024 were due to the uncertainty about the extension of the development levy waiver in April (later extended until December) and water connection charge refund arrangement expiring in September.”
“We believe that the completion date for the units commenced last year as well as some of the commencements from the end of 2023, will span the two-year period of 2025 and 2026, and hence we forecast a total housing output of around 75,000 units in the next two years. We expect a significant increase in output, particularly in the first half of this year but to reach the output levels required to meet demand, key labour, land and capital issues will need to be addressed.”
Increased labour capacity will be required
Mr Hayes continued: “Construction is still a labour-intensive industry and while there has been some growth in employment in the sector and there may have been a reallocation of labour from commercial construction projects to residential units, unless productivity increases significantly in the sector, we will not be able to increase output to the required levels with current employment levels.”
Infrastructure and utilities must be provided with housing projects
Mr Hayes added: “The number of residential units granted planning permission fell by more than 21% last year but it is worth noting that between 2018 and 2024, over 260,000 units were granted planning permission. Nearly half of these were for apartments and about 95,000 of those apartments were given planning permission more than two years ago. However, only 44,000 apartments were completed over the seven-year period.”
“Planning permissions are an important first step in the supply chain of building homes, but we also need to provide infrastructure and utilities along with housing projects. Increasingly there are signs of delays in securing utility connections such as water and electricity for new projects, with Irish Water stating that under current capacity they can only connect 35,000 new homes a year to the network with further investment required to increase capacity. Additionally, the funding challenge to deliver the increased levels of housing output required is substantial with an estimated €17 billion required from private capital sources. Irish banks are already providing significant finance to the housing market but the capacity of the sector could be expanded by way of risk sharing with the State.”
Mr Hayes concluded: “Challenges in relation to supply of new housing is not unique to Ireland with other developed economies experiencing similar problems, particularly since the pandemic. However, the success of the Irish economy has exacerbated the challenge in Ireland with significant income, employment and population growth in the past decade. There are various factors affecting housing output such as the inefficiencies in the planning system, the availability of zoned and serviced land, labour capacity and productivity of the construction sector as well as the availability of capital investment. While creating the environment to plan for increased housing output in the medium to long term, we need to find solutions to inefficiencies in the system in order to provide significantly more homes in the short term.”
ENDS/
The BPFI Housing Market Monitor Q4 2024 is available to download here.
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 110 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace.
Contact: Fiona Murphy, Head of Communications, 087 9740046, fiona.murphy@bpfi.ie or Jillian Heffernan, Director of Communications, 087 9016880, jillian.heffernan@bpfi.ie.
