The Economic and Social Research Institute (ESRI) has warned that supply shortages in the housing market could potentially lead to a further increase in house prices.
In its Quarterly Economic Commentary, the think-tank warned of a significant falloff in house completions this year as a result of the current restrictions on construction.
They said this would "exacerbate" the supply problem which could lead to house prices increasing further.
According to the latest figures from the Central Statistics Office (CSO), house prices nationally have increased by 2.6% nationally in the last year.
The ESRI report suggests the current lockdown will have an "adverse" impact on supply.
It said the restrictions on construction combined with a falloff in investment was likely to see the supply of new homes fall to 15,000 this year, down from just under 21,000 in 2020.
Before the pandemic the ESRI had been expecting house completions to reach 26,000 units this year.
The leading indicators – commencement notices, planning – “are quite pessimistic in terms of where the level of supply is likely to be”, said ESRI research professor Kieran McQuinn.
This falloff in supply was likely “exacerbate” the gap between supply and structural demand in the State’s housing market, he said, potentially leading to a further acceleration in house-price inflation.
The lead-in time for large scale housing schemes means next year is not expected to see any improvement, even though building sites are expected to be fully open.
With would-be buyers chasing fewer homes, tougher Central Bank rules may be needed to curb runaway prices, warned McQuinn.
