Long lasting impact of the pandemic may exacerbate supply issues in the market
Building on the large body of existing ESRI research, the paper ‘Assessing the impacts of COVID-19 on the Irish property market: An overview of the issues’ explores the channels through which COVID-19 may impact on the Irish property market and provides some discussion around where policy may need refocusing or re-evaluation.
The pandemic is likely to have a significant short-term impact on housing demand. While the decline in incomes associated with record unemployment has been muted by the various government support schemes, the economic uncertainty created by the pandemic is likely to make potential home buyers less willing, and able, to engage in significant purchases such as buying a house. Furthermore, the concentration of renting households in employment sectors most affected by ongoing public health restrictions may present medium-term affordability challenges without policy intervention.
The most significant impact that the pandemic will have on housing supply is likely to play out over the long term. The uncertainty created by the pandemic, productivity challenges from public health restrictions in the construction sector, and possible credit access issues for construction companies are all likely to reduce investment in housing today. A fall in investment in housing today will lead to a decline in completions in the future. This means that were demand to pick up in the future as uncertainty abates, the imbalance between supply and demand already apparent in the housing market may become even greater. This would exacerbate affordability issues that already exist in the market. The most efficient response is an increase in state provision of social and affordability housing in the short to medium term.
Commenting on the work, author Conor O’ Toole, of the ESRI stated:
“COVID-19 has disrupted all aspects of the economy and the housing market is no different. On the demand side, the impact on incomes is likely to limit the ability of some households to purchase and may exacerbate existing affordability challenges in the rental sector.”
Commenting on the work, author Kieran McQuinn, of the ESRI stated:
“The biggest threat from the pandemic is the risk to housing supply. Ireland’s housing market has suffered from chronic supply shortages over the past number of years and the disruptions to activity which are associated with COVID-19 place further pressure on delivery in the private sector. As a response, the state should increase the supply of social and affordable housing.”