A new report on the housing market shows that while restrictions imposed to halt the spread of Covid-19 will have a huge impact on housing supply this year, demand may be more resilient amongst borrowers on typical home buyer incomes.

But the latest Housing Market Monitor from Banking and Payments Federation Ireland suggests that it is also likely that demand for homes and mortgages may be lower than estimated due to uncertainty in the housing market and weaker consumer confidence.

The construction sector stopped all activity between the end of March and the middle of May, while current activity is very much limited due to work practice restrictions as part of Covid-19 health measures.  

Estimates before the current crisis for total housing completions in 2020 were between 24,000 to 26,000 units. 

Assuming that the sector could operate at 50% to 75% capacity for the rest of the year, BPFI has estimated that total completions would be around 14,000 to 16,500 units in 2020. This would leave a gap of between 10,000 and 12,000 units in total this year.

Dr Ali Ugur, chief economist at BPFI, said the demand side may hold up better due to the important role which income levels play in housing and mortgage demand.

"Looking at those in receipt of either the Pandemic Unemployment Payment (PUP) or the Temporary Wage Subsidy Scheme (TWSS) we can see that those in the highest income brackets have been impacted the least," Dr Ugur said. 

"Workers with average gross earnings of more than €950 weekly or about €50,000 per annum account for just 14% of those receiving the PUP payment and 21% of those participating in the TWSS scheme. Looking at these figures in the context of the mortgage market, it is earners in this same income bracket that account for the majority of those drawing down mortgages," the economist noted.

Dr Ugur said that First Time Buyers with incomes of less than €50,000 accounted for just 17% of the FTB drawdowns whereas customers with incomes less than €50,000 only accounted for 7% of the total drawdowns amongst mover purchasers in 2019. 

"Given the significant and increasing share of FTBs in the Irish mortgage market, and income levels required to secure a mortgage, income losses during the pandemic may not have a significant effect on demand for mortgages from this cohort," he added.