Rising costs and higher interest rates 'could affect viability of housing projects' 

BPFI chief economist Ali Ugur said current indicators show homebuilding activity “remains robust” with increasing supply having an impact on prices.

“Increased supply should provide better affordability for potential home buyers as average prices start to moderate,” Mr Ugur said.

“At the same time, existing and further cost pressures, as well as the changing interest rate environment could affect the viability of some of the housing projects currently planned, particularly in the institutional investor market, which could affect output in 2024 and further.”

Figures from the Central Statistics Office show that, at the end of April, annual house price inflation was running at 3.6%. It has been on a decline since its March 2022 peak of 15%.

There are regional differences when it comes to house price inflation.

Average prices in Dublin were 9.1% lower than the peak in 2007 whereas they are 2.5% higher throughout the rest of the country.

“The decline in the annual property price inflation can partly be explained by the significant increase in housing supply since the pandemic as well as recent interest rate increases by the European Central Bank,” Mr Ugur said.

There were 6,716 new completions during the first three months of the year — up 19.1% compared to the same time last year.

It is also the highest number during this period since 2011.

Between January and April this year, nearly 10,000 housing units have commenced — significantly higher than levels observed during the same period in 2021 and 2022. There were 27,000 houses commenced throughout 2022.

“If the current trend in residential construction activity were to continue, it is likely that total output in 2024 would be around 28,000 units,” the report said.

Self-built homes accounted for nearly 18% of total completions between January and March.

In terms of planning permissions, there was an annual increase of 37.8% in the total number of dwelling units approved at 11,659 units in the first three months of the year — over half of which are houses — compared with 8,463 at the same time last year.

Between January and March this year, there were 10,908 mortgage drawdowns valued at €2.9 billion — a 10.1% increase in volume and a 14.1% increase in value compared to last year.

First-time buyers remained the single largest segment by volume and value, accounting for around 51% of overall mortgage drawdowns.

Overall, mortgage drawdowns increased 5.9% year-to-year to almost 10,500, the highest level since early 2009.