Rent levels likely to remain elevated as housing supply struggles to match demand8th March 2017
Banking & Payments Federation Ireland (BPFI) today published the BPFI Housing Market Monitor for Q4 2016. The monitor draws on a range of published data under the three key headings of housing supply, housing prices and rents and housing transactions for its assessment of the current state of the housing market.
In his commentary accompanying the report, BPFI’s Chief Economist, Dr Ali Uğur, points to the ongoing mismatch in housing supply and demand and the impact this is likely to have on house prices and rent in the medium term:
‘Various estimates show that the equilibrium level of housing demand in Ireland is between 25,000 and 30,000 units. Assuming a 15% growth rate per annum in building activity, it will be around 2021 by the time we reach output levels of around 30,000 units per annum, notwithstanding the fact that pent-up demand over the next five years as well as positive migration trends are likely to push up the required level. This is likely to put further pressure both on property prices and particularly on rents.
Dr Uğur’s analysis continues by cautioning that that house price pressures, particularly for rents, are unlikely to ease even once demand levels are met and that this will have a significant impact on the economy into the future:
‘The main challenge in terms of price developments is that, even when we reach the level of supply to meet the estimated equilibrium level of demand, there is unlikely to be significant downward price pressure on housing costs, particularly for rents. This means that rents will be much higher than at present and they would be likely to remain at those levels for some time, significantly affecting economic activity in the future. In terms of housing purchase, measures such as the Help to Buy scheme should assist some buyers in relation to deposit requirements. However, availability of supply is likely to be the main factor in determining price developments in the near future.’
The BPFI Housing Market Monitor is published quarterly and can be viewed on the BPFI website here.
Note: Banking & Payments Federation Ireland (BPFI) is the voice of banking and payments in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
Contact: Jillian Heffernan, Head of Communications, 087 901 6880