COVID regulations have hit many markets hard, but possibly the worst be in the housing industry. Due to certain restrictions, the housing supply of homes built between 2020 and 2022 is predicted to be 23,000 fewer than normal. This, combined with the growing demand for housing as well as the built-up saving of household revenue during the pandemic could cause the demand for housing in Ireland to skyrocket, leading to higher pricing. Over the last year, it is predicted that over €13 billion have been saved up by families in Ireland, and with that many households are looking to improve their housing situation at the end of quarantine. The spending demand of these households far exceeds to the market supply of housing to be offered to said customers.
The Central Bank predicts that there will be 18,500 new housing completions in 2020, and in 2021 and 2022 that number will rise to around 22,000. This in total will be 23,000 fewer houses entering the market in these three years compared to the normal growth rate of housing supply prior to the pandemic.
Overall, there will be huge pressures placed on housing prices. In Europe, there is an existing housing concern for the shortage of housing, but the limited supply of houses being built due to the pandemic will not only highlight this issue, but there is a valid concern that there will be a huge rise in pricing to reflect demand. There are, however, several factors that are pushing the market in the opposite direction. This includes the large increase in unemployment that the quarantine has brought as well as the general public’s uncertainty for the future of the housing market and the direction that the lifting of COVID regulations will cause the market to move.
Under unemployment government assistance, nearly 460,000 people are currently claiming the Pandemic Unemployment Payment (PUP). This has caused a worrying number of individuals to claim they do not expect to return to work. During the first lockdown, only 8% of the PUP recipients did not expect to return to work within the next three months, but this has increased to nearly 23% currently. The Central Bank claims that the EU-UK trade deal will increase the tariffs on goods, and likely lead to a lessening of the number of individuals staying under unemployment government assistance. But there will much uncertainty in how this will affect the still growing demand in the housing industry.
Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers.