The number of housing units in the planning system dropped by 27 per cent in the second quarter as the State went into lockdown to curb the spread of coronavirus, according to a report by Deloitte.
The consultancy’s latest real estate advisory also warns of a fall-off in demand in the rental sector due to an influx in supply and restrictions around travel, which has reduced demand for short-term lets from tourists.
Units
The number of residential units in the planning system – between applications lodged, planning granted and commencement notices – fell to 22,615 in the second quarter, down from over 30,000 in the previous quarter, the report said.
Some 74 residential schemes – projects with greater than 20 units – were granted planning permission during the quarter compared with 95 in the previous three-month period, it said.
There was a similar contraction in activity on the commercial side with a total of eight office schemes granted permission compared with 18 in the previous quarter.
"While the initial effects of the Covid-19 pandemic on the real estate sector are still being realised, the drop in the number of applications being granted permission during the quarter is most likely a direct implication of the Department of Housing making orders to add 56 days to the statutory time period for processing planning applications, with such orders needed as a measure to deal with the operational effects of the necessary public health measures implemented by the Government," Deloitte director Vincent Sorohan said.
However, he said the pandemic was likely to see a reduction in short-term demand within the residential rental market.
Stock
“This is due to both an influx of supply of short-term rental stock due to lack of international travel, along with a decrease in rental demand due to the temporary relocation of tenants from Dublin City until at least the end of 2020,” he said.
“In the medium term, however we would expect residential rental demand to remain relatively stable,” he said.
“As the short-term softening eases, we expect that demand will return as stock is absorbed along with wider limitations in affordability of the sales market. All of this is likely to increase rental demand due to limited new stock coming to market in key locations,” he said.
He pinpointed affordability as the key issue in the residential sales market. “The economic deflation experienced will unfortunately place less certainty on household incomes, and cause lenders to be more cautious,” he said.
“ Short term, there has been evidence of reasonably robust new home sales numbers, driven by pent-up demand by those predominantly with mortgage approval already in place and limited to no effect on income,” he said.
“ However, we anticipate that as we move through the remainder of 2020 and into Q1 2021, new home sales will likely slow down as the overall economic effects of Covid-19 take hold,” he said.
Applications
Mr Sorohan said the report highlighted an increase in the number of planning applications for office development across Ireland in the second quarter, with a 100 per cent jump in applications lodged per quarter.
“This cannot be taken as an indicator of confidence in the office sector market, however, as it remains to be seen how many of these progress to commencements,” he cautioned.
The report indicates an increase in office development outside Dublin with 8 per cent of all new applications located outside the capital. There was an equal split in this between Leinster and the Rest of Ireland, showing a growing interest in commercial development outside of Dublin.
