The construction of new apartment schemes, and an increase in investor interest in the provision of student accommodation are among the key drivers of construction activity in Ireland.
That is according to Deloitte's annual Crane Survey which analyses the development landscape and examines the trends and issues that will impact how the construction industry performs this year.
The report shows a total of 32,695 residential units were completed across the country in 2023. This is the highest number since 2008 with a key driver being a significant jump in the volume of apartments.
Apartments increased to 11,600 units in 2023, up from over 9,100 in 2022 or just 3,450 in 2019.
Meanwhile, the delivery of housing schemes remained largely unchanged with 15,500 units completed compared with 15,140 in 2022.
The analysis found that the construction of apartments was mainly concentrated in Dublin, which accounted for over 78% of 2023’s new supply of this housing category.
Deloitte said residential commencements also recorded a notable rise with government policy influencing performance.
A total of 32,800 units commenced construction in 2023, a 22% annual increase. This increase has continued into the start of 2024 with just under 12,000 units commenced in the first quarter. On an annual basis, this figure sits at 37,410, the highest level reached during this development cycle.
Key to this significant increase, according to the report, is the development levy waiver and water charge refund which was introduced in April 2023.
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Market intelligence indicates the waiver and refund scheme improve viability, making units viable that otherwise would not have been.
The government has recently announced an extension of the development levy waiver until the end of 2024, and the water charge refund until the beginning of October 2024.
The report highlights how affordability is being increased for first-time-buyers (FTBs) through the government’s first home scheme and help-to-buy initiative.
FTB mortgage approvals rose to 30,450 in 2023, up 9% annually and over 21% since 2019 in a trend that is likely to continue in 2024.
In contrast, the volume of mortgage approvals for mover-purchasers decreased 6.8% annually in 2023, which was 15% below 2019 levels.
Kate English, economist and head of real estate research said, "Government policy has had a positive impact on the residential market, both improving first-time buyers’ purchasing power and driving construction activity. First Time-Buyer mortgage approvals are at a high, while the volume of approvals through the First Home Scheme has risen substantially. The challenge now is meeting this demand.
"Growing FTB demand against a backdrop of increasing yet insufficient new supply and reducing release of second-hand stock to the market, places further pressure on the residential market. This is evidenced by the increase in prices, particularly over the past six months."
Ms English said the dramatic increase in commencements can be, in part, attributed to the impact of the development levy waiver and water charge refund.
"The short-term measure has aided viability, making some units viable that otherwise were not. Uncertainty over whether the waiver and refund would continue has likely resulted in a spike in commencements in the first months of 2024 and may mean commencements will be moderate in the coming months."
Demand for student accommodation grows
The reports find there were 198,970 full-time students enrolled in third level institutions in Ireland in the academic year 2022/23. Enrolments have increased by 15% since 2014, owing to a combination of domestic demographics, increased international enrolments and an expansion in course availability.
By 2030, total enrolments in full-time third level education are estimated to be 240,000, marking an increase of 33% from 10 years prior.
An estimated 1,630 beds were added to the stock of purpose-built student accommodation in 2023, with Cork absorbing the largest share (814 beds).
Completions in 2024 will be more limited, as just three schemes, totalling 1,160 beds were actively on site at the start of 2024. The largest of these, Novel Bottleworks, at the former Coca Cola bottle factory on the Carrigrohane Road in Cork completed recently and is taking bookings for the 2024/2025 academic year, bringing total stock in the Cork market to just over 7,100.
The remaining beds under construction at present are based in New Harbour, Galway (345 beds) and Stoneybatter, Dublin (193 beds).
Planning applications lodged towards the end of 2023 and start of 2024 are a prime example of the renewed interest in the student accommodation sector.
Planning applications of scale are located across Dublin, Cork and Waterford, through LRD applications.
In total, there are over 10,900 units in the planning pipeline across plans applied and plans granted. The number that will translate into new PBSA stock remains uncertain, as SHD delays, and viability concerns weigh on some of these schemes.
John Doddy, partner and head of real estate said the Crane Survey highlights a continuation of the strong demand for purpose-built student accommodation with third level enrolments set to peak in less than six years.
"While construction activity in student accommodation dwindled in the opening months of 2024 and completions in 2024 are expected to be more limited, current construction activity perhaps underestimates the level of activity and investor interest for student accommodation at present."
