Figures show no shortage of skilled labour
The number of housing units started in the past year has reached 30,500, the strongest reading since July 2008.
It is the clearest sign yet that construction is finally accelerating toward meeting demand.
The numbers, compiled by Davy Stockbrokers, are based on 12 months of official New Building Control Management System Commencements.
The data for September show 3,200 starts during the month, taking the rolling 12-month total to 30,500.
The numbers are important not only because they point to more new homes being available next year, but because they suggest the construction sector is managing to find sufficient skilled workers and materials to drive forward with the sites.
Before the Covid pandemic, concerns were already being raised that potential labour shortages on sites and rising wages and other costs could prevent the construction sector from delivering the 30,000 to 35,000 units a year needed to meet demand.
“That starts have now accelerated to 30,500 demonstrates that there was already sufficient capacity,” Davy’s chief economist Conall Mac Coille said.
Mr Mac Coille noted that while the number of new homes next year is set to be the highest since the housing bubble burst, the actual number of completions would still be the lowest since 1994 – excluding the period since the crash in 2008.
This suggests the construction sector may be better able to rebuild capacity than some have feared.
The update is the latest in a series of data points in recent weeks, all of them indicating an acceleration in the housing sector ahead of previous estimates.
The details also point to where supply is coming and the type of new homes that will be available.
Mr Mac Coille said 19,600 of the new building starts over the past year are outside Dublin and therefore more likely to be traditional housing rather than apartments, and more likely to be targeted at owner-occupiers, including first-time buyers.
Politically, that is likely to take some heat out of the debate around the housing crisis – in contrast to a pick-up in completions of new apartment blocks in Dublin over the past two years that has, if anything, intensified that debate.
This is because so many of the new city centre and suburban apartments are helping meet rental demand only at the upper end of the private rented sector.
Those high-cost, high-end blocks have been bought in bulk by the relatively new class of cuckoo funds, or institutional investors, meaning little of the new supply of homes in Dublin is available to owner-occupiers.
The latest housing data now indicate that roughly two-thirds of the new starts over the past year have been houses rather than apartments and are therefore more likely to translate into new mortgages, Davy’s Mr MacCoille said.
As a result, the stockbroker has revised up its estimate for the number of mortgages it expects banks to lend in 2022 and 2023.
Davy’s latest estimate for housing completions next year is 29,000, with momentum suggesting that could under-shoot.
Typically, there has been a 12-month lag between housing starts and completions, which suggests next year’s total could be closer to the elusive 30,000 mark. However, the speed of delivery depends on the mix of homes being built, with apartments slower to complete.
The numbers compare with the 20,500 completions in 2020.