Calls for credit scheme for builders as home deliveries plateau
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The Banking and Payments Federation, Ireland (BPFI) has called for the introduction of a credit guarantee scheme for smaller residential construction companies as housing completions slow, putting increased pressure on prices.
This comes as the European Central Bank (ECB) is due to meet again on Thursday where another interest rate cut is expected to be announced which could also have the effect of further pushing up house prices.
The latest data from the Central Statistics Office (CSO) show that as of the end of September, the median house price in Ireland was €346,000, which is on average 14% higher than the previous high in April 2007 before the financial crisis.
The BPFI pointed out that in the year to the end of September, there were just 31,900 homes delivered which is only up slightly from the 31,400 a year prior. The Central Bank of Ireland estimates that around 52,000 new homes are needed a year up to 2050 to keep up with demand and population growth.
In its latest Housing Market Monitor, the BPFI highlights that the average house price continues to increase as supply plateaus amid strong demand and income growth.
The report noted that the construction industry continues to face capacity constraints and relatively low productivity making it unlikely to produce the output required in the short term with existing resources.
Chief executive of the BPFI Brian Hayes said despite the fact that housing completions during the first 10 months of the year have “more than doubled” compared to the same period last year however it is unclear when they will be delivered.
The increase in commencements coincided with the planned expiration of various Government waivers and refunds which builders could take advantage of.
“The completion date for qualifying units using these waivers is the end of 2026, so it is unclear as to what proportion of these commencements will be completed in 2025,” he said.
In order to bolster housing numbers, the BPFI is calling for a credit guarantee scheme to be introduced for small- and medium-sized residential construction companies in order to “further advance finance to developers with viable projects but insufficient equity”.
“Average house price inflation has gained momentum mainly due to low housing stock and continuing housing and mortgage demand amid growing employment and income levels,” Mr Hayes said.
“If a higher level of housing output is to be realised, it is critical that smaller developers can deliver more units each year than they are currently able to do.”