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Fewer houses may be needed after Covid hit to immigration

ESRI says the country’s housing needs over the next two decades could vary widely


Housing completions languished this year at just 20,000 new homes

Housing completions languished this year at just 20,000 new homes

Housing completions languished this year at just 20,000 new homes

The fallout from the Covid-19 pandemic could narrow the gap between housing needs and supply if it means a slow down in immigration over the next few years.

Research from the Economic and Social Research Institute (ESRI) for the Department of Housing says Ireland may need to build as many as 33,000 new homes a year to meet demand.

That is well above the 25,000 figure used in the National Planning Framework and points to a potential worsening of the current crisis.

However, the report suggests the country’s housing needs over the next two decades could vary widely depending on the rate of inward migration – which it sees as the key driver of housing demand.

The higher estimate for housing is based on the population hitting around six million.

Even a less extreme so-called base-line scenario sees a need for 28,000 new homes a year, based on a rise in population by 925,000 between now now 2040.

ESRI researchers think the bulk of the new population, 514,000 people, will be concentrated in and around Dublin and will be the engine of a surge in housing demand in the east and midlands.

That concentrated demand might soften if planning and economic policies manage to shift more population growth to the other cities, in which case ‘only’ around 50pc of the expansion would be in Dublin and the surrounding commuter counties with relatively more growth in Limerick, Cork and Galway in

Even so, with housing completions languishing this year at just 20,000 new homes, the ESRI figures suggest the gap between supply and demand is set to continue and even worsen the current housing crisis, driving up prices and rents.

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However, the ESRI research says the need for housing could be far lower, at 26,000 a year if inward migration slows. The authors say one reason it might is the knock-on effect of Covid-19.

“It is likely that travel restrictions, uncertainty about the evolution of the pandemic and lower confidence may result in migration being lower than in the baseline scenario, at least in the short term.”

That could mean migration into Ireland falling from 33,700 in 2019 to just 5,000 a year.

“The longer the pandemic and measures to contain it persist, the more likely estimates of structural housing demand will be closer to those in the low international migration scenario,” the ESRI report says.

While that would dampen housing demand, it would in all likelihood only happen if the economic recovery from the pandemic was slow or weak, which could well mean less investment in housing.

Meanwhile, new data from Ulster Bank chief economist Simon Barry – who tracks the construction sector month by month using an index based on a survey of purchasing managers (PMI) – suggests building supply is set to speed up.

“The latest results of the Ulster Bank Construction PMI survey provided encouraging signals in a number of respects,” he said.

Activity on sites returned to growth in November, and new orders – a strong indicator of future activity – was at a 19-month high. "The November results also showed a further sharp strengthening of optimism about the year ahead where sentiment rose to its highest level since February 2020 as confidence is being underpinned by expectations that 2021 will see activity pick-up following a year marked by significant pandemic-related disruption,” Mr Barry said.

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