The effect of Covid-19 on the housing market is likely to
come from a number of areas.
·
The fall in production as a
result of time lost on new home sites.
·
Delays in connection of mains
services to new home sites, due to social distancing rules.
·
Cautiousness and uncertainty even
with the most committed of buyers.
·
The practical impact it has on
buyers’ and sellers’ ability to transact, as social distancing rules limits
people’s ability to go about their normal business
·
Its impact on the economy and the traditional
drivers of affordability.
Under normal circumstances it can take anywhere from four
to ten months to construct a new home. There
is no denying that Covid 19 will negatively impact on housing supply this year,
with forecasts predicting that we could see a reduction of completed units fall
anywhere between 20 – 35 %.
The main concern across the board is the ability for
buyers to acquire mortgages, given the employment losses throughout the Country
arising from Covid 19. This factored in with purchasers with existing mortgages
having to be reassessed will negatively impact on lending.
There is no question the demand
for new homes will be affected by mortgage challenges and the uncertainty in
the economy, but the reduction in supply should minimise this. Prior to the Covid-19 pandemic, supply was still well below the estimated 35,000 new units needed
annually, so the fall in production and supply
this year should increase this
shortfall, that’s even taking into account the negative demand effects arising
from Covid-19. As a result,
buyers seeking to purchase and move into a new home in 2020 will ensure
continued demand for the reduced level of stock delivered in 2020.
Going forward sellers
will undoubtedly need to remain pragmatic on pricing over the course of 2020,
as demand becomes now more than ever dependent on supply.
