House prices could fall 12 percent by the end of the decade if the government meets its housing target of building 35,000 homes a year.
Achieving this would require more public money, more foreign construction workers and more local workers moving from commercial to residential projects, according to a report by the Economic and Social Research Institute (ESRI).
“The problem is that we need to increase and find that workforce,” said ESRI research professor Kieran McQuinn, one of the report’s authors.
“Given the observed imbalance between the structural demand for housing and the actual supply, an increase in housing activity in the domestic economy is clearly needed. In any case, there will be a certain realignment between commercial and residential.”
ESRI estimates that the government will miss its annual housing targets by about 10,000 units per year through 2030.
This means that around 25,000 new apartments will be completed per year instead of the targeted 35,000.
Meeting the 35,000-a-year target would ease the housing market and increase construction wages by 1 percent by the end of the decade, ESRI noted.
The ESRI analysis shows that total investment in housing construction has not recovered since the financial crisis and is less than half the level of total construction in 2000.
‘Other building and construction’ investment – which includes commercial property but not home improvement – is now back at Celtic Tiger levels.
That means the number of new workers required “may not be as large” if some are recruited from the commercial sector, the report says.
The study found that immigration of foreign construction workers to the country since the 2008 crash has been “small” compared to sectors like IT and manufacturing.
In 2016, there were many French, German and Indian workers in IT, manufacturing and healthcare, with a proportion also in scientific and technical occupations.
Apart from Romanian workers, the number of non-Irish construction workers was negligible that year.
However, the study acknowledged that “high housing costs may themselves pose a challenge in attracting migrants” and that migration “will continue to exert upward pressure on house prices in the near term”.
ESRI is urging the government to consider adding construction to its list of “critical skills” for visas, saying better utilization of vacant lots, modular housing and land market reform could help encourage completion.
More public funds are needed as the growth of new bank loans for construction has slowed faster than in other sectors.
The study comes at the same time as a slowdown in housing starts and overall construction activity.
Housing activity fell 16.2 percent between July and September compared to the previous three months, while housing starts fell by about 10,000 since the first three months of the year.
The government is on track to exceed its housing target this year but fall short in 2023.
Population growth over the past five years has roughly tripled the housing stock, according to figures from the Banking and Payments Federation of Ireland (BPFI).
Rising demand means house prices could continue to rise without a “significant increase in supply,” the BPFI said this week.
Annual house price growth slowed to just under 11 percent in September after peaking at over 15 percent earlier this year. But rental costs are rising and have risen about 85 percent over the past decade, the BPFI said.
https://www.independent.ie/business/personal-finance/property-mortgages/house-prices-could-fall-by-12pc-if-government-targets-are-met-42206766.html Property prices in Ireland could fall by 12 per cent if government targets are met