According to Reuters.com, “2 Prominent banks in Ireland are not receiving enough demand to use the funds dedicated for the housing development.” It reveals that Ireland has struggled to house its citizens effectively for a long time.
Moreover, it faces challenges in meeting the demand for more house construction. As The Irish Times puts it, “House prices rose by 10% in November 2024”. It is 154.5% high since 2012. The demand is high for a few reasons. It is a severe shortage of supply, help-to-buy schemes, and cheaper mortgage rates.
The mortgage rates were expected to fall at the European Central level. However, it did not materialise in the year 2024. But again, 2025 saw a minor decline in mortgage rates. It fell from 3.82% in January to 3.89% by the February’s end.
What was the whole plan for building construction?
Last year, both Bank of Ireland and AIB increased their housing development pool by 40%. It thus increased the budget from 2.5 million Euros to 2.81 million Euros. The authorities did it with the aim of constructing 50000 houses every year.
However, the excitement soon turned down. According to the Bank of Ireland’s commercial head, “The lender struggles to find enough projects beyond 1.2 billion. The authority may draw it from the pool of 2.5 billion. However, it is short of the demand than what is expected.”
What could be the reason behind the low demand for housing construction?
According to AIB’s managing director of capital markets, Cathy Bryce, –
“My bank is more likely to lend more towards the construction progress. However, limitations of a fragmented construction sector and not-so-promising predictions regarding the equity investors contribute to the slowdown. Planning delays, low land availability, basic affordability and the cumbersome rental rules prove the biggest obstacles.”
Here are other reasons behind the slow demand for housing construction in Ireland:
- Financial crisis
The 2008 financial crisis affected the Ireland’s housing construction demand. It thus decreased the construction output and lead to shortage of houses. The crises reveals the over-indebtness of the mortgage borrowers, construction firms and property developers. It thus collapsed the construction industry and employment. It automatically decreased the pace of new home buildings in Ireland.
2. Low productivity
Inefficient construction process, technology and old machinery impacted Ireland’s growth. Moreover, high labour costs, material costs and construction unit affected the progress further. Thus, the increase in costs like materials and construction automatically increased the prices of residential properties. It thus made it impossible for the Ireland citizens to afford it. This widened the gap between the demand and the supply.
3. Population growth
The population from migration has increased in the Ireland. It automatically increased the demand for the more houses construction. However, the demand is so high to meet the pace of the new house construction in the country. Thus, this imbalance led to shortage of houses in the country. It is the reason behind the costly houses in the country. This shortage of affordable housing is a major concern in the Ireland.
Precisely, the aftermath of 2008 crisis could deem as one of primary the reasons behind this decline in housing construction.
How can Ireland counter this shortage of housing effectively?
To get out of this structure of inflation and non-affordability, Ireland must reconstruct some policies. It should ensure lenient guidelines for renting, investing, and purchasing purposes. Here are other steps that may help the country meet the building construction demand:
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Focus on reducing construction cost
This is the primary reason for the costly housing structures. Thus, the company must work towards ensuring an affordable one. It is possible to explore the construction materials. Check the techniques and plan structures that might help optimise the costs. One can focus on durability instead of good-looking structures. Here are other ways to reduce construction costs:
- Diversify the supply chains
- Consider government subsidies for material costs
- Implement processes to minimise waste
2. Strengthen the retail investors
Check the possibilities of incentivising the retail sector. The country may rule out activities to attract investors, potentially through tax-advantaged vehicles. Here are some ways to improve the retail investments:
- Improve financial literacy
- Simplify the products for investments (ease of investing)
- Make sure to ensure a transparent structure for investors
Aspects such as transparency help investors analyse the scope of profits from a future perspective. Therefore, they invest accordingly to benefit later.
3. Invest in an equity scheme for mortgage borrowers
The government can release a shared home ownership scheme. It will help new mortgage seekers bridge the dream of home ownership. They can split the deposit, mortgage, and overall costs of purchasing a home. The scheme provides 30% of the property value in exchange for a percentage of the home ownership. It reduces the cost of buying a home for people. Alternatively, it may prove a good investment opportunity for investors.
Alternatively, it will help the new homeowners save money for home development and renovation. Even if they struggle, aspects like home improvement loans may help them. It will help them finance the renovation costs without affecting the basic budget and lifestyle. One can either get a secured or unsecured loan, depending on the need and affordability.
4. Promote Compulsory Sale Orders (CSO)
Compulsory Sale Orders (CSO), also known by the name Compulsory Purchase Orders (CPO), allow authorities to acquire land for the general public’s needs. It may include using the land for housing construction projects. It may free up the sites where vacant properties impact the construction progress. They can instead use the land to construct valid and new properties. Additionally, the organisation may facilitate the construction of new roads and other developments to promote inhabitation.
Bottom line
Yes, it is hard to counter the challenge of building new houses in the country. However, certain initiatives like addressing the unregulated properties, changing rental and investment regulations may help. Alternatively, focusing on reducing the construction costs and marketing the retail sector proves important in this progress game.