A faster-than-expected recovery in construction is expected to see as many as 27,000 new homes built next year and 31,000 built in 2023, the Central Bank said.
This is close to the government’s goal of building 33,000 houses per year, as set out in its recent Housing for All strategy, and a level of housing construction not seen since the era of the Celtic Tiger.
However, in its latest assessment of the Irish economy, the Central Bank warns that significant public spending on housing over the next few years could face capacity constraints, mainly related to a labor shortage. , and could fuel new inflationary pressures in the sector.
“Housing investments have recovered well from site closures during the health crisis and are expected to return to 2019 levels or higher this year,” the regulator said.
Nonetheless, housing supply is expected to remain below long-term demand estimates of around 35,000 to 40,000 new homes per year through the end of 2023, with completed homes dropping to around 21,700 units this year and 27,000 and 31,000 in 2022 and 2023 respectively, It said.
The bank also noted that “persistent imbalances” between supply and demand for housing mean that house prices continue to rise.
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House price inflation jumped to 8.6 percent in July, the fastest level of growth seen in the market in nearly three years, from 6.9 percent the month before.
Prices have trended upward due to factors related to the pandemic such as increased savings.
The government’s housing strategy aims to deliver an additional 300,000 homes by 2030, which represents around 33,000 per year.
In its report, the Central Bank warned that with substantial increases in public and private spending on housing expected in the coming years, capacity constraints and other factors could limit the extent to which this increase in spending continues. translates into more housing units.
“In addition to supporting the demand for new housing, it is reasonable to expect that part of the savings that households have accumulated since the start of the pandemic will be used for real estate investment purposes,” a- he declared.
“This would include higher demand for renovations and upgrades to existing properties, which will be necessary to meet climate action goals,” he said, noting that home improvements are expected to increase by 19% over the horizon. forecast.
“An increase in labor resources and an easing of pressure on the supply chain and input costs will have to emerge to ensure real growth,” the regulator concluded.
While predicting a major economic recovery in growth – 15% this year, 7% next year – thanks to a boom in consumption and a further acceleration in exports, the central bank’s latest quarterly report highlights the build-up of inflationary pressures in the Irish economy in recent months.
Businesses and households face higher costs and prices due to a combination of supply bottlenecks and growing demand, leading to increased costs of transport, energy and electricity. other inputs, he said, while suggesting that many current drivers of inflation are expected to subside through 2022 and 2023.
He warned that a stronger rebound in household spending, more persistent supply disruptions or a slower labor supply response could lead to higher inflation than currently expected.
“Promoting sustainable growth in Irish living standards requires careful management of national economic policy as it moves away from the focus on pandemic-related measures,” he said.
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